Preamble

The House met at half-past
Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — INDUSTRY

West Midlands

Mr. Ashley: asked the Secretary of State for Industry what steps he is taking to reduce unemployment in the West Midlands and to increase investment in the region ; and if he will make a statement.

The Minister of State, Department of Industry (Mr. Eric S. Heffer): I am aware of the concern expressed recently about the economic situation in the West Midlands. When the National Enterprise Board and the planning agreements system come into operation, we shall be in a position to do more to encourage industry to raise the level of investment.

Mr. Ashley: I appreciate that reply, but cannot my hon. Friend take emergency action now to increase investment and reduce unemployment until the board

becomes fully operative? Is he aware that the North Staffordshire area, which is within the West Midlands region, has special problems? Will he undertake to consider those problems and take them into account in any moves he makes to attract new, modern industry into the region?

Mr. Heffer: With regard to my hon. Friend's first point, it would be wrong for me to anticipate the Budget of my right hon. Friend the Chancellor of the Exchequer. My Department is aware of the problems in the West Midlands and of the similar problems in other parts of the country. We are examining them, but it would be wrong for me to suggest that we could take emergency action.

Mrs. Renée Short: asked the Secretary of State for Industry what proposals he has to revitalise industry in the West Midlands in order to end short-time working in subsidiaries to the motor industry.

The Secretary of State for Industry (Mr. Anthony Wedgwood Benn): The West Midlands and the motor industry are going through a very difficult period and we shall continue to keep a close watch on the situation.

Mrs. Short: Is my right hon. Friend aware that the Goodyear tyre plant, which is the largest employer in my constituency, has been on short time for several weeks and that several hundred redundancies have now been declared? Does he appreciate that that is a very serious


situation? Further, is he aware that the industrial building industry is in difficulty and that the future completion of a Government skillcentre is in jeopardy? Does he not think it necessary to take urgent steps to see that that matter is remedied?

Mr. Benn: I suggest to my hon. Friend that when individual firms run into difficulties there should be talks between the unions and the management concerned, and that an approach should be made to my Department. Something can be done in some of these cases. Beyond that, as my hon. Friend will realise, the world situation is a difficult one against which to resolve these problems rapidly.

Mr. Cormack: Is the right hon. Gentleman aware that many people in the West Midlands work in small businesses and that the very existence of those businesses is being put in jeopardy by the Chancellor's capital transfer tax proposals? Will he have discussions with his right hon. Friend to ensure that his good endeavours on one front are not sabotaged by his right hon. Friend on another?

Mr. Benn: I take the point that the hon. Gentleman is making, but it would be wrong to suppose that the current difficulties facing small firms in the Midlands, which may be making components or supplying to the large motor firms, are currently affected by the Budget proposals to which he refers. That is a separate point, which I have no doubt the hon. Gentleman is taking up with my right hon. Friend.

Companies (Disclosure of Information)

Mr. Hall-Davis: asked the Secretary of State for Industry why, if the disclosure of information might be held to be prejudicial to the interests of an undertaking, he is requiring in the Industry Bill an undertaking to disclose that it is appealing against a direction to furnish such information.

Mr. Benn: When a company makes an application that may restrict the information available to its workers their representatives should know of this, and be able to argue their case.

Mr. Hall-Davis: Is it not more in line with the Maoist derivations of the right hon. Gentleman's philosophy on industrial affairs that a company should be

given the right to appeal for the protection of non-disclosure, but to be obliged to disclose, before its case is heard, that it is seeeking such protection? Is not that a negation of British natural justice?

Mr. Benn: The last great incursion of Mao Tse-tung into British politics was the warm welcome he gave the former Leader of the Opposition when he visited China last May. The Maoist contribution to current debate is to give warm support to British membership of the Common Market.
In our view, people who invest their lives in British industry are entitled to know more than they are now allowed by the shareholders to know about the future of the companies in which they work. It is no good Conservative Members constantly saying that we should tell the truth to the British people if, when we ask industrialists to do the same about the firms in which those people work, they always line up with those in favour of secrecy.

Mr. McNamara: Is my right hon. Friend aware that from the interventions from the Opposition on this sort of topic we take it that they approve of such closures as that of the Imperial Typewriter Company, in Hull, where the workers, having been told that there was nothing to concern them about their future, received one month's notice a fortnight later? A total of 1,400 jobs have been lost. The company is up and off with the British taxpayers' money, and there is a great deal of unemployment in my constitutency.

Mr. Benn: I agree with my hon. Friend that it is a public scandal that men who have worked for many years in industry should be laid off by managers who have told their workers nothing about the problems which lead to the closure.

Mr. Heseltine: Will the Secretary of State tell us which paragraph of the White Paper states that companies will be compelled to disclose information where they have no intention of entering into planning agreements?

Mr. Benn: The hon. Gentleman must not seek to reproduce at Question Time the debate in the Committee which is


going through the Industry Bill line by line. We have made it absolutely clear.—[Interruption.] Does the hon. Gentleman wish to intervene?

Mr. Heseltinŉe: Which paragraph?

Mr. Benn: Perhaps the hon. Gentleman will allow me to answer the question. It was made absolutely clear in the White Paper that the disclosure of information by management to workers and Government was a central part of our proposals.

Private Investment

Mr. Ridley: asked the Secretary of State for Industry if he will give the figure for private industrial investment in 1974 ; and how this compares with 1973.

Mr. Benn: Capital expenditure by manufacturing industry in 1974 is provisionally estimated at about £3,260 million, at current prices. This represents £2,115 million at 1970 prices—10 per cent. greater than in 1973. This figure relates mainly to private industry, but includes publicly-owned manufacturing concerns.

Mr. Ridley: Is it not clear from those figures that industry was investing more in 1974 than in 1973, contrary to what the right hon. Gentleman has alleged? Will he now publicly admit that the policies of the previous Conservative Government were producing an increase in investment and that it would be wise for him not to interfere with that improvement?

Mr. Bean: I am afraid that I do not accept that argument, in that the so-called "Barber boom" had come to a halt by the summer of 1973, before the oil crisis. The previous Conservative Government left office following the disaster of the three-day working week and the investment in the pipeline at that time may have continued until the end of the year —but the forecasts for future investment were low when the hon. Gentleman's Government left office.

Mr. Ronald Atkins: Does my right hon. Friend agree that the figures are an argument for the increased investment in the public sector which he proposes to carry out?

Mr. Benn: My hon. Friend is quite right. The one sustained area of continued high investment and high investment intention is the public sector. That has come out clearly from the recent NEDC reports. It is our intention to introduce the National Enterprise Board and to make good use of the Conservative Government's Industry Act of 1972. That indicates our view that public sector investment must play a leading part in re-equipping British industry.

Mr. Heseltine: Does the right hon. Gentleman not agree that if investment stood high in 1974 as a result of commitments in the pipeline in 1973, it makes nonsense of his attempts to try to blame the Conservatives in 1970 for falling investment which was already planned in 1969?

Mr. Benn: No.

British Steel Corporation

Mr. Peter Morrison: asked the Secretary of State for Industry what is the total number of BSC employees working on less than a five-day week.

The Under-Secretary of State for Industry (Mr. Michael Meacher): The corporation informs us that some 4,500 employees are at present working less than five days a week on their normal duties, but the corporation has so far found alternative work for nearly all of these, so as to provide full five-day working.

Mr. Morrison: Is the Minister aware that there is grave concern amongst the employees of the British Steel Corporation about their future? Does he agree that nationalisation is not necessarily an answer to full employment, and that it can lead to redundancies just as much as private industry?

Mr. Meacher: In fact, the record of the British Steel Corporation on redundancies is a great deal better than it would have been if the corporation had been a number of private concerns. That is shown by the fact that only half of the job losses resulting after 1967, after nationalisation, led to redundancies. In 50 per cent. of all cases there was redeployment. I can give the hon. Gentleman an assurance that the BSC is taking all steps to try to overcome the


present situation. It is making up 80 per cent. of average earnings under the terms of the guaranteed working week agreement made between the corporation and the unions. That is a great deal better than arrangements made with private concerns in similar circumstances.

Concorde

Mr. Terry Walker: asked the Secretary of State for Industry when he now expects the Concorde aircraft to go into operational service.

Mr. Meacher: As my hon. Friend the Under-Secretary of State for Trade said in reply to the hon. Member for New. bury (Mr. McNair-Wilson) on 26th February, the question of the date on which British Airways and Air France should begin commercial services with Concorde will be a matter for discussion at the Secretary of State's forthcoming meeting with the French Minister for Transport which is to take place in London on 25th March 1975.

Mr. Walker: Does my hon. Friend agree that it is vital that Concorde goes into service at the earliest possible moment? Does he further agree that not until Concorde is in service shall we get foreign orders for the aircraft? I impress upon the Ministry that it is vital for jobs in my area—I am sure that my right hon. Friend the Secretary of State for Industry will agree with this—that the aircraft gets into operational service at the earliest possible moment.

Mr. Meacher: I entirely agree that it is of the greatest importance to ensure that Concorde is brought into operation at the earliest possible moment. That is why we are taking every step to ensure that that happens. Provided that the certification programme can be completed later this year we hope that it will be possible to start limited service before the end of this year.

Mr. Cope: Is the Minister aware that among the steps that we hope the Government will take is that of ensuring that both the British Embassy in Washington and British Airways do everything possible to help those in America arguing against Senator Proxmire's Bill, so that the aircraft can enter service in the United States at the same time as it enters service elsewhere?

Mr. Meacher: We are doing all that we can to assist in the discussions to which the hon. Gentleman refers. I think he will be pleased to know that the recent publication by the US Federal Aviation Administration of an environmental impact statement on Concorde is an important step forward. Of course, there are other steps to be taken. There has to be a period of public hearings and representations before the FAA decision is finally made. We shall seek to assist in those disussions in the way that the hon. Gentleman has described.

Johnson Firth Brown

Mr. Hooley: asked the Secretary of State for Industry what further discussions he has held with the trade unions and/or management concerning the future of Johnson Firth Brown consequent on the collapse of Jessel Securities.

Mr. Meacher: Since my reply to my hon. Friend on 9th December, my right hon. and noble Friend the Minister of State has had discussions with both these parties about the acquisition by Government of Jessel Securities' shareholding in Johnson Firth Brown Ltd. However, hon. Members will know that the shares have now been otherwise disposed of.

Mr. Hooley: Is my hon. Friend aware that there is strong resentment amongst the workers in Johnson Firth Brown about the interference of the European Coal and Steel Community in this matter, and its interference with the proposals of the British Steel Corporation for taking a share in this important company? Does he agree that the special steel industry in Sheffield is far too important to become the catspaw of city financiers in London? Further, will my hon. Friend give an assurance that the NEB, when set up, will study that industry with a view to a sensible reorganisation?

Mr. Meacher: On my hon. Friend's first point, I certainly agree that it is a matter of deep public concern that the European Commission imposed conditions which were as unacceptable as they were in this case—namely, the divesting of William Beardmore's and the JFB Foundry, in Glasgow, employing 1,000 men. That is a condition which even before it was carried out caused


acute job anxiety in that firm, and which would certainly have undermined its viability if it were outside a larger group. I agree, too, that a decision on the reorganisation of the special steel sector should not be left to a board which allowed itself to be argued into a self-damaging situation as a result of political suspicions which were entirely unjustified. I give my hon. Friend the assurance that we shall retain an NEB option to reorganise the industry in the proper interests of wider industrial benefits to this country. That is what we now propose to do.

Mr. Michael Marshall: Is the Minister aware that what the ECSC is doing in this area is reflecting the view that a monopoly raises grave problems? Does he agree that if the logic of his argument is carried forward, we shall have a continuing series of monopolies right across our industries, irrespective of the interests of both consumers and the work forces employed in those industries? That is what the argument is about.

Mr. Meacher: I do not accept that the ECSC is entitled to take power from this House in the way that it proposes. Though there may be competition considerations, it is utterly unacceptable to the Government—and, I hope, to all Members of this House—that a condition should be imposed which puts at risk the jobs of 1,000 men.

South Yorkshire

Mr. Edwin Wainwright: asked the Secretary of State for Industry, if he will take action to reduce the high unemployment in certain areas of South Yorkshire, by reclassifying the South Yorkshire intermediate area as a development district.

Mr. Heffer: While unemployment in South Yorkshire is certainly too high, particularly in certain areas, the general level is about the national average and, therefore, reclassification cannot be justified at the moment.

Mr. Edwin Wainwright: Does my hon. Friend realise that we are not standing for that? Is he aware that unemployment in the Mexborough district has been running at between 6·5 per cent. and 6·7 per cent. in recent years and that young people in the area have to go outside

it to find suitable jobs? When will the Government do something to ensure that South Yorkshire has more viable industries and more diversification to provide some alternative to the pits for our young people?

Mr. Heffer: The Government's policy in relation to the classification of areas·and it has been the policy of all Governments—is to do it on a broad-band basis. We understand that within the broad bands some parts have a very high level of unemployment. We are looking at the whole matter, but at this stage I am afraid that I cannot give my hon. Friend the answer that he wants, which is to upgrade certain areas within the broad band.

Mr. Richard Wainwright: Is the Minister aware that the newly-constituted area of South Yorkshire was created for local government purposes and that for any treatment of the kind proposed in the Question the whole industrial area of the former West Riding should be considered as one unit?

Mr. Heffer: Local government boundaries and areas for intermediate, development and special development areas do not necessarily follow the same lines. I reiterate that this area is an intermediate area. It gets certain assistance from the Government. Nevertheless, there are problems within the area. We understand this. The position at the moment is that there is a general recession throughout industry, which not only applies to the Yorkshire area concerned but extends into development and special development areas with even higher levels of
unemployment.

Workers' Co-operatives

Mr. Stanley: asked the Secretary of State for Industry whether he will publish the guidelines currently being used by his Department to determine the terms under which financial assistance is offered to workers' co-operatives.

Mr. Benn: Guidelines for assistance under Section 7 of the Industry Act 1972 were announced on 2nd October 1972, and notified to the House on 1st November 1972. The considerations governing Section 8 cases are wider, and both are covered by the Act itself. These apply to all applications for assistance under


these sections of the Industry Act 1972, irrespective of the type of company involved. The final responsibility lies with Ministers.

Mr. Stanley: Will the Secretary of State say when, on any previous occasion to that concerning the Kirkby co-operative, the taxpayer has provided 100 per cent. of the capital of a company on the basis that it is non-returnable to the Exchequer whether the co-operative succeeds or fails?

Mr. Benn: I cannot answer that specific question without notice. However, I can say that this was the first co-operative supported under the Industry Act 1972. I have noticed the bitter hatred expressed by the Opposition to all workers' co-operatives.

Mr. Tom King: Does the Secretary of State realise the importance of having guidelines? Will he explain why two separate cases—Aston Martin and Meriden—were considered not viable, though both had export potential, both were rejected by the IDAB, but the Secretary of State opted for one and not for the other?

Mr. Benn: No guidelines were written into the Bill passed by the previous Government. The matter was left to Ministers, subject to the advice of the IDAIR, with no obligation to accept that advice. In the case of Meriden, a marketing arrangement had been reached with NVT, whereas in the case of Aston Martin the absence of adequate marketing arrangements played some part in reaching our decision. The latest proposals for support from Aston Martin would principally have benefited the creditors and not the future of the business. It was on those grounds that I felt unable to accept them.

Mr. Michael McNair-Wilson: asked the Secretary of State for Industry if he will make a further statement about Government financial assistance to the Meriden Workers' Co-operative.

Mr. Benn: With the completion of the necessary agreements, assistance has been provided to enable the co-operative to begin production.

Mr. McNair-Wilson: Is the right hon. Gentleman still satisfied that the amount of assistance being given will enable the co-operative to reach viability? Is it his intention that it should continue to remain

a subcontractor to Norton Villiers Triumph, or does he want it to be something more?

Mr. Benn: I certainly adhere to the decision that I took and recommended to the House. This co-operative is an important example of what may be achieved by these means.
As the hon. Gentleman knows, the arrangement with NVT is time dated for two years for marketing purposes. I hope that with the launching of the cooperative, which I understand began production today, we may open a slightly happier chapter for the British motor cycle industry.

Mr. Benyon: Does the right hon. Gentleman accept that the Aston Martin workers in my constituency think that they behaved far more responsibly than the workers at the Meriden co-operative? Even at this late hour, will the right hon. Gentleman agree to meet those concerned to see whether the proposals put forward, which involve a degree of worker participation, can be reconsidered to save this famous company?

Mr. Benn: I have never refused to meet people who have asked, through their Member of Parliament, to see me. That is the practice that I aim to follow. However, the parallel that the hon. Gentleman sought to draw between Aston Martin and Meriden is not a close one. I pointed out in answer to an earlier supplementary question that the marketing arrangements at Meriden are established through NVT. The marketing arrangements for Aston Martin are not so established. All the support in the latest proposal would have gone to the creditors, not to establish the business on a viable basis.

Mr. Heseltine: The right hon. Gentleman has already given the House an assurance that the maximum aid to the co-operative is £4·95 million. Will he now answer the question put to him by my hon. Friend the Member of Newbury (Mr. McNair-Wilson), namely whether that is sufficient to make the co-operative viable? If not, what will happen when the money runs out?

Mr. Benn: It is an old principle as the hon Gentleman knows, that Ministers cannot answer hypothetical questions. I


answered the question by adhering to the statement that I made to the House in recommending support of the Meriden co-operative on the basis I proposed. I stick to that view.

Scotland (Minister's Functions)

Mr. Dalyell: asked the Secretary of State for Industry what functions he has in Scotland, and what functions he will retain after the proposed transfer of certain powers to the Secretry of State for Scotland.

Mr. Canavan: asked the Secretary of State for Industry what role he envisages for his Department in Scotland after the setting up of the Scottish Development Agency.

The Under-Secretary of State for Industry (Mr. Gregor Mackenzie): At present my right hon. Friend's functions in Scotland are the same as in the rest of Great Britain. Following transfer of responsibility for regional selective assistance in Scotland to my right hon. Friend the Secretary of State for Scotland and the setting up of the Scottish Development Agency which will be answerable to him, my right hon. Friend will retain throughout Great Britain his existing responsibilities for general and sectoral industrial policy, statutory responsibility for the British Steel Corporation and the Post Office, and responsibility for industrial research and development, together with certain aspects of regional industrial policy. In all these matters in so far as they affect Scotland, we shall, as always, consult my right hon. Friend the Secretary of State for Scotland.

Mr. Dalyell: Is it possible to avoid duplication between the Scottish Development Agency and the National Enterprise Board?

Mr. Mackenzie: As my hon. Friend knows, the Secretary of State for Scotland has published a consultative document on which he will be seeking advice from interested parties on the general question of the Scottish Development Agency. But we have always consulted very closely on this matter and there is no difficulty in making this distinction. These matters are being worked on at present.

Mr. Canavan: Will the National Enterprise Board be regarded as a complement

to, rather than a competitor of, the Scottish Development Agency? Is my hon. Friend aware that what Scottish industry requires is meaningful decentralisation within the context of a comprehensive United Kingdom plan for industrial development'? Does he agree that, just as political devolution is preferable to complete political separatism, industrial devolution is to be preferred to complete industrial separatism, in order to serve the best interests of the Scottish people and people elsewhere in the United Kingdom?

Mr. Mackenzie: I agree with my hon. Friend. The whole purpose is to allow this degree of decentralisation, in that certain decisions will be taken in Scotland about Scottish affairs. However, the broad overall aim is to preserve the industrial integrity of the United Kingdom.

Mr. Crawford: Is the hon. Gentleman aware that great concern has been expressed by industrialists in Scotland about a remark by the Minister of State for Industry during the Second Reading of the Industry Bill in which he said that the writ of the NEB would run in Scotland, that the Scottish Development Agency would be subservient to the NEB, and that this would lead to even greater centralisation of decision-making in Scottish affairs?

Mr. Mackenzie: I do not recall any-think of the kind.

Mr. Dempsey: Which Minister will be responsible for ending the shameful practice whereby industrialists such as the Tinsley Wire Company, Coatbridge, settle in Scotland with Government financial aid and then, after capturing the Scottish market, move to England, throwing 120 men out of work and without regard to the social and economic consequences to the work force?

Mr. Mackenzie: I am very conscious of problem. My hon. Friend and I know this one very well. That is why we are introducing the practice of planning agreements. We believe that these will be valuable and useful in this regard.

Industry Bill

Mrs. Millie Miller: asked the Secretary of State for Industry which provisions of the Industry Bill are affected by EEC regulations.

Mr. Benn: I explained in my reply to the hon. Member for Tynemouth (Mr. Trotter) on 25th February how the exercise of the powers proposed in the Bill might be affected by membership of the EEC. All State aids that might be offered under the Industry Bill would be subject to the control of the European Commission under Articles 92–94 of the Treaty of Rome.

Mrs. Miller: Is my right hon. Friend aware that the Italian tobacco industry, which is at present under State control, will, under the regulations of the EEC, end its control within one year? On 31st January the Italian Journal Stampa Sera reported that one year's notice has been given for State control to end and that private tobacco companies are already moving in to provide their own monopoly in the private sphere. This will not be to the advantage of Italy and it is unlikely to be to the advantage—

Mr. Speaker: Order. The hon. Lady must put a question.

Mrs. Miller: Is my right hon. Friend aware of the circumstances that I have outlined?

Mr. Benn: I thought that my hon. Friend was asking whether I was aware of something. I was not aware of the details of that case. However, my hon. Friend should be in no doubt that the powers exercised by the Commission under the Treaty of Rome are powers that the previous Government entrenched in our domestic legislation in Section 2 of the European Communities Act 1972.

Mr. Heseltine: Does the right hon. Gentleman agree that on 3rd March his right hon. Friend the Foreign Secretary told the other EEC countries that the Government could now accept the terms that had been negotiated? Does he agree with this set of negotiations?

Mr. Benn: The hon. Gentleman knows that the Cabinet has not yet determined its view on the renegotiation package. I am surprised that the hon. Gentleman, who is always shouting his head off about the powers of the National Enterprise Board, should not be concerned about the powers of the European Commission over the House of Commons.

Mr. Trotter: asked the Secretary of State for Industry how many representations he has received from both sides of industry since the publication of the Industry Bill.

Mr. Moonman: asked the Secretary of State for Industry how many representations he has received from both sides of industry since the publication of the Industry Bill.

Mr. Heffer: My right hon. Friend has received a number of representations from both sides of industry and from the City, which he is considering.

Mr. Trotter: Have not the heads of industry expressed their deep alarm at the unprecedented powers being taken by the Secretary of State and the spirit in which those powers are apt to be applied? Does the right hon. Gentleman deny that his intention in seeking further State control, intervention and ownership is to try to achieve a Socialist Britain after his own pattern, rather than an efficient free enterprise industry?

Mr. Heffer: The hon. Gentleman should be aware that we have received approximately 30 letters from various bodies. They have not been quite so critical as the hon. Gentleman suggests, although some obviously have been critical and negative in their approach. The Government intend to carry out the manifesto upon which they were elected in both February and October last year.

Mr. Moonman: In order to give the Bill an even chance of success, will my hon. Friend consider making a statement at the earliest possible opportunity to avoid further confusion about the whole process of the sharing of information and the Planning Agreements?

Mr. Heffer: The Bill is now in Committee. Naturally, there will be the closest parliamentary scrutiny by both sides of the Committee and statements will be made and explanations given relating to the points to which my hon. Friend has referred. If my hon. Friend has a specific point in mind, I suggest that he gets in touch with me or my right hon. Friend and we shall answer that point.

Mr. Tom King: In addition to the representations received from both sides


of industry, may I ask what representations the Minister has had from the Home Policy Committee of the Labour Party—in which I believe his right hon. Friend has some distant interest—and what attitude he is taking towards those representations?

Mr. Heffer: Surely a number of standing committees continually discuss the programme and policy of the Conservative Party. The Labour Party has a Home Policy Committee, which is a standing body, which I believe is entitled to express its opinion on present and future Government policies.

Mr. Blenkinsop: Is my hon. Friend aware of strong representations from workers on Tyneside, for example, for the rapid passage of the Industry Bill and, indeed, the introduction of Bills for the nationalisation of the shipbuilding industry in order that worker participation may become a reality?

Mr. Heffer: My hon. Friend is absolutely right. One of the most interesting features of life as a Minister in the Department of Industry is the number of deputations that one receives from trade unions and workers on the shop floor who insist that we get this Bill through at the earliest possible moment.

British Leyland Motor Corporation

Mr. Biffen: asked the Secretary of State for Industry if he will make a statement on his future plans for British Leyland Motor Corporation Ltd.

Mr. Benn: The team led by Sir Don Ryder is at present conducting, in consultation with the British Leyland management and trades unions, an overall assessment of British Leyland's present situation and future prospects. I have undertaken to report to the House as soon as possible on the team's recommendations and their financial implications.

Mr. Biffen: As there are disturbing rumours that Sir Don Ryder is thinking in terms of 30,000 redundancies, does the right hon. Gentleman foresee a situation in which he can guarantee that there is no likelihood of plant closures as a result of Government assistance?

Mr. Benn: I invited Sir Don Ryder to undertake these discussions with the

management and unions. I have had no report, or forecast of a report. When the Government receive the report they will discuss the matter internally and with the unions and management. However, I have had no indication of the kind that the hon. Gentleman conveyed in his supplementary question.

Mr. Mike Thomas: Is my right hon. Friend aware that industrialists not unconnected with this company consistently argue that politicians who fail should be removed? Does he feel that industrialists who fail should also be removed?

Mr. Benn: I understand my hon. Friend's general point. The House would be better advised to wait until we have the report from Sir Don Ryder and his team before we jump to conclusions about any solutions which may emerge from it.

Tracked Hovercraft Vehicle

Sir David Renton: asked the Secretary of State for Industry, in view of the fact that the tracked hovercraft vehicle, in its original building at Earith, is the only vehicle of its kind in the world and is of historic interest and potentially of scientific value, if he will take steps to ensure the suitable preservation and public display of this vehicle.

Mr. Meacher: The vehicle, RTV31, is the property of Tracked Hovercraft Ltd., which developed it with funds provided by the National Research Development Corporation. The project was terminated two years ago and the disposal or preservation of any residual equipment is the responsibility of NRDC and THL.

Sir D. Renton: Will the Minister bear in mind that it was Government money which was used to develop this most promising invention, in which we have a world-wide lead and which has now become a museum piece? Does his answer mean that the Government are taking no responsibility whatever for its preservation for the future in case it should have further scientific value?

Mr. Meacher: The right hon. and learned Gentleman is quite right to refer to the fact that when the previous Conservative Government cancelled this project £5million of public money was lost without any benefit in sight. As for his


question about preservation of the project, this is not a unique vehicle. Other air cushion vehicles are being developed elsewhere, notably in France. As I sought to make clear, the question of the vehicle's display and preservation is a matter primarily for NRDC. but if it makes such a specific request to us we shall certainly consider it.

Mr. Lane: As much of the expertise for the project came from my constituency, and as there is great disappointment that it is not possible to proceed with it, will the Government keep an open mind on the suggestion that my right hon. and learned Friend has made and positively respond if an appeal for help on a modest scale reaches them in the near future?

Mr. Meacher: Yes, Sir.

National Enterprise Board

Mr. Grylls: asked the Secretary of State for Industry whether he intends to give the National Enterprise Board specific directions to acquire shares in profitable manufacturing industry.

Mr. Heffer: This is unlikely, because the Industry Bill already provides the necessary powers.

Mr. Grylls: Whose agreement will be necessary before shares are acquired in profitable manufacturing industries?

Mr. Heffer: As the hon. Gentleman knows full well, the position is that there are no compulsory powers in the Industry Bill or in the White Paper.

Mr. Flannery: Does my hon. Friend agree that a large section of people were disturbed by Sir Don Ryder's view, expressed on television to Mr. Christopher Chataway, that nationalisation is a method of regenerating collapsing British industry in order to hand it back, ultimately, to private enterprise? Will my hon. Friend take note of that and make it clear that large numbers of working people hope that profitable industry will be nationalised on behalf of working people and not taken over only when it is in a process of collapse, as it inevitably is under capitalism?

Mr. Heffer: I personally am not aware of Sir Don Ryder making such a statement, although I understand that something similar was supposedly said—

although it was denied afterwards—by the chairman of a nationalised industry. It is clearly laid down in the White Paper and in the statement of the National Enterprise Board that one of the functions of the board is that it should enter into profit-making industry.

Mr. Edelman: asked the Secretary of State for Industry whether he will make it a condition of appointment to the National Enterprise Board that no persons appointed shall take up further appointments at the termination of their contracts with any firm with whom they have had financial dealings in the course of their work at the NEB.

Mr. Heffer: This is a very complicated problem, but one which is important, and we are looking into the issues involved. At this stage, it is not possible to give a definite answer one way or the other.

Mr. Edelman: I thank my hon. Friend for that neutral answer. In view of the special and privileged relationship between members of the NEB and industrial firms, is it not desirable that there should be an interval before such members take up appointments with private industry with which they may have had financial or advisory dealings? In those circumstances, will the Minister ensure that the rules governing such continuing appointments are assimilated to those governing the appointment of senior ex-civil servants when they leave the public service to take up appointments with private enterprise?

Mr. Heffer: My hon. Friend is right. There are well-established rules for the Civil Service and the Armed Forces. There is no general code for public corporations. However, I have taken on board the point that my hon. Friend has made. I cannot go further than saying that we are looking into the issues involved.

South-West Region

Mr. Hicks: asked the Secretary of State for Industry whether he is satisfied that the present extent and character of regional policies take sufficient account of the specific needs of the South-West assisted areas, particularly in respect of the promotion of primary and local craft


industries and the problems facing small firms.

Mr. Gregor Mackenzie: Yes, Sir. Substantial assistance is available under the Industry Act 1972 by way of regional development grants and selective financial assistance, and also regional employment premium for manufacturing firms. The Development Commission, through the Council for Small Industries in Rural Areas, provides financial assistance by way of loans and technical and advisory services in rural areas. In addition, my own Department's Small Firms Information Centre in Bristol is available to help small businesses find solutions to their problems.

Mr. Hicks: Does not the Minister agree that the economic structure of the South-West differs in character from that of the other assisted areas and, therefore, that greater flexibility in applying existing regional policies is essential if our specific problems are to be solved? In particular, does he not agree that the Small Firms Assistance Centre should be transferred from Bristol to a site within the assisted area itself, because Bristol is nearer to London than it is to Bodmin?

Mr. Mackenzie: We have 10 such centres throughout the country, and they are very helpful. We have considered this matter and I am satisfied that this can be done from Bristol at present. In any event, may I say, wearing my hat as someone having responsibility for the Post Office, that a Freephone service is available for any small industrialist who wants to contact the Bristol office? We have not found any difficulties about that so far.

Mr. Emery: Does the Minister realise that in the South-West the small firms are subcontractors or smaller parts of major industry, and that these are usually the plants that close down first? Will he consider giving more money and greater assistance to COSIRA, to ensure that there is greater investment in the rural areas?
Secondly, I support my hon. Friend for Bodmin (Mr. Hicks), in that the West Country does not consider that the unit in Bristol understands much about the problems of Devon and Cornwall. The Minister would be well advised to have the Small Firms Assistance Centre moved

out of Bristol to some area in Somerset, Devon or Cornwall.

Mr. Mackenzie: We have devoted much thought to the question which would be the best place for the centre. I have been given to understand by those in the area that so far the needs of smaller companies are being met. As regards the hon. Gentleman's question about investment in rural areas, the whole question of COSIRA falls within the purview of my right hon. Friend the Secretary of State for the Environment. We can put this point to him.

Co-operative Development Agency

Mr. Newens: asked the Secretary of State for Industry if he will be introducing legislation to establish a co-operative development agency during the course of this session of Parliament.

Mr. Meacher: The proposal to establish a co-operative development agency is under consideration, but it is unlikely that decisions will be taken in time to introduce any legislation that might be considered appropriate this Session.

Mr. Newens: Does my hon. Friend agree, however, that the co-operative development agency, as envisaged in the Labour Party manifesto, could play a very important part in extending co-operation in our economy and that co-operation is a very desirable form of social ownership, which has proved its worth over many years, in distribution and elsewhere?

Mr. Meacher: I entirely support the sentiments my hon. Friend has expressed. That is why the concept was originally put into the manifesto. We have great hopes that it will be able to achieve the extension of social ownership and all that goes with it in a society that is still basically capitalist.

Mr. Baker: As, in the first co-operative that has got off the ground, the cost of saving each job is modestly estimated at £30,000, is this the new standard that the Government intend to apply to saving jobs? If so, and if 30,000 jobs are at risk in British Leyland, has the Minister calculated the cost? It is about £900 million.

Mr. Meacher: The hon. Gentleman should take into account the fact that we


shall not be confined to firms in which private enterprise has already totally failed.

Mr. Baker: Then it will be worse.

Mr. Mike Thomas: Will my hon. Friend quell the animal noises emanating from hon. Members opposite by telling the House that the first co-operative got off the ground about 135 years ago, and that it has proved a great success? There are those of us in the co-operative movement who are very anxious to see this item in the manifesto proceeded with speedily.

Mr. Meacher: My hon. Friend is right. There are many existing co-operatives in France, Italy, Spain and Sweden which are very successful forms of social enterprise.

Regional Policy

Mr. Marten: asked the Secretary of State for Industry, if he will make a statement on the EEC plans for exercising measures of control on the United Kingdom's industrial and regional policies.

Mr. Benn: All the industrial and regional policies of all member States involving State aids are subject to the provisions of the Treaties of Rome and Paris, which conferred power of decision upon the Commission. It is one of the Government's renegotiation objectives to ensure the retention by Parliament of the powers which we need to pursue effective regional, industrial and fiscal policies.

Mr. Marten: As there has been no apparent progress, so far, on the latter point which the Minister mentioned, does he not agree that there is still some way to go before the pledge on which the party opposite was elected can be honoured? Will the right hon. Gentleman make this point to his cabinet colleagues in the near future?

Mr. Benn: I do not think I can anticipate the discussions which are currently taking place, but I sought to answer the hon. Gentleman's question.

PERSONAL INJURY (LIABILITY AND COMPENSATION)

Mr. Hannam: asked the Attorney-General if he can yet say when the Royal

Commission on civil liability and compensation for personal injury will report.

The Solicitor-General (Mr. Peter Archer): No, Sir.

Mr. Hannam: Is the hon. and learned Gentleman aware that there are 250 cases of severe vaccine brain-damaged children who have been waiting since May 1973 for the Royal Commission to report? Is he also aware that the Secretary of State for Social Services declined to award compensation to them until the report is made? Will he press his right hon. Friend the Secretary of State for Social Services to award the compensation now rather than wait for the report? In any case, will he confirm that the Royal Commission will not be able to recommend retrospective awards?

The Solicitor-General: The hon. Gentleman will be aware that my noble Friend and I are no less anxious than he is that the report should be available as soon as possible. This is a very wide-ranging inquiry. The second part of the hon. Gentleman's question is a matter for my right hon. Friend the Secretary of State for Social Services. Whether retrospective legislation will be appropriate will depend to some extent upon what is recommended, but I shall see that what the hon. Gentleman has said is passed to my right hon. Friend.

Mr. Lawrence: Is the Solicitor-General aware that the findings of the report are likely to involve matters of far-reaching importance to individual freedoms? Will he use his good offices with the right hon. Gentleman the Leader of the House to ensure that when the findings are made public there will be debate about them on the Floor of the House?

The Solicitor-General: Perhaps we should wait until the report is available. I shall certainly see that what the hon. Gentleman has said is brought to the attention of my right hon. and learned Friend.

MAGISTRATES (TRAINING)

Mr. Sims: asked the Attorney-General what is his policy towards adding to the membership of the Lord Chancellor's Advisory Committee on the Training


of Magistrates so as to include representatives of those persons involved in the work of magistrates' courts.

The Attorney-General (Mr. S. C. Silkin): My noble Friend's policy is to ensure that the committee is well qualified to give him the advice which he requires on the training of magistrates. He is satisfied that it is so. It does include several members who are directly involved in the work of magistrates' courts. It has also called for the views of those, including the relevant representative bodies, who may be able to assist it in its task. With permission, I shall circulate in the Official Report the membership and qualifications of the committee, which have already been published in the Press.

Mr. Sims: I am grateful to the right hon. and learned Gentleman for that reply. Does he agree that most members of the advisory committee are magistrates or magistrates' clerks? Does he accept that there are other court officers, such as probation officers and possibly even police, whose advice and experience would be of some value to the advisory committee? Will he consider drawing upon such sources of experience?

The Attorney-General: Of course the experience of people such as the hon. Gentleman has suggested is extremely valuable. The committee has invited memoranda from a substantial number of organisations, including some to which the hon. Gentleman has referred. The work of the committee is sufficiently advanced to make reconstitution inappropriate, and we hope that work will not be slowed down in that way.

Mr. Watkinson: Does my right hon. and learned Friend not consider it timely to consider the training of the judiciary generally? Does he not think it right to impose mandatory training on all judges, particularly High Court judges in matters of sentencing?

The Attorney-General: Mandatory training is not a matter for me. My hon. Friend will be aware that judges do have sentencing conferences from time to time, and in the course of those conferences they meet people of all kinds of different disciplines. That is of great assistance from the point of view of the question which my hon. Friend asked.

Following is the information:

LORD CHANCELLOR'S ADVISORY COMMITTEE ON THE TRAINING OF MAGISTRATES

Members

The Honourable Sir Leslie Boreham (Chairman). Judge of the High Court, Queen's Bench Division.

Sir Thomas Skyrme, KCVO, CB, CBE, TD (Vice-Chairman). Secretary of Commissions to the Lord Chancellor and a Justice of the Peace for the City of London.

Mr. E. R. Horsman, OBE (Secretary). Training Officer in the Lord Chancellor's Office. Formerly Clerk to the Justices of Eastleigh, Romsey and Totton. One-time President of the Justices' Clerks' Society.

Sir William Addison, DL. Chairman of the Council of the Magistrates' Association. A Justice of the Peace for the County of Essex and Chairman of the Epping and Ongar Division.

Mr. W. H. Clarke. Justice of the Peace for the County of Hereford and Worcester. Member of the Executive and Treatment of Offenders Committees of the Magistrates' Association and of the Central Council of Magistrates' Courts Committees.

Mr. D. A. Crockatt, MBE, DL. Justice of the Peace for West Yorkshire. Member of the Council of the Magistrates' Association and Chairman of the Training Committee of the Council.

Mr. C. J. S. French, QC. Barrister at Law Recorder.

Dr. D. E. Gray, MBE, PhD. Senior Lecturer, Department of Extramural Studies, University of Birmingham. Justice of the Peace for the West Midlands and Chairman of the Solihull Division. Member of the Central Council of Magistrates' Courts Committees.

Mr. F. H. Hatchard. Clerk to the Justices for Walsall.

Mr. J. B. Horsman, OBE. Clerk to the Justices for Wigan. President of the Justices' Clerks' Society.

Mr. R. L. Jones. Assistant Secretary, Home Office.

Mr. D. W. Jones-Williams, OBE, MC, TD, DL. Commissioner for local administration for Wales. Formerly Circuit Administrator for Wales and Clerk of the Peace and Magistrates' Training Officer for the County of Merioneth.

Mrs. N. M. Lowry. Metropolitan Stipendiary Magistrate.

Mrs. N. M. McGregor. Justice of the Peace for Inner London. Member of the Central Council of Magistrates' Courts Committees.

His Honour Judge Mynett, QC. Circuit fudge. Mr. Eric Taylor. Solicitor.

INSURANCE COMPANIES (WINDING-UP)

Mr. Trotter: asked the Attorney-General whether, following the enactment of the Insurance Companies Amendment Act 1973, rules have been made under


Section 365 of the Companies Act 1948 with respect to the winding-up of insurance companies.

The Attorney-General: No, Sir.

Mr. Trotter: Does the right hon. and learned Gentleman not agree that it would have been of great assistance to the liquidator of Nation Life if such rules had been made? Will he now give urgent attention to this problem?

The Attorney-General: In the particular circumstances of that case it is highly unlikely that rules made in advance would have been of great assistance, but the position, now that we have had this case—it is the first one in a generation in which a company dealing with life business has had to be wound up—is that the lessons which are to be drawn from that liquidation will certainly be very much borne in mind, not merely in connection with any rules and regulations which may be brought forward but from the point of view of the Bill which my right hon. Friend the Secretary of State for Trade will be introducing this Session.

MAINTENANCE ORDERS (COMMITTAL WARRANTS)

Mr. Jessel: asked the Attorney-General if he will advise magistrates' courts to make it their practice that when persons in respect of whom committal warrants have been issued for nonpayment of maintenance apply under Section 18(4) of the Maintenance Order Act for a hearing to ask for the committal to be quashed on grounds of inability to pay maintenance due to unemployment, such persons should be granted a hearing.

The Solicitor-General: No, Sir. The question whether an application under Section 18(4) of the Maintenance Orders Act 1958 should be referred to the court is a matter within the judicial discretion of the magistrate hearing the application, whose duty it is to consider all the relevant circumstances.

Mr. Jessel: Although the court has the power to decide whether to allow a hearing in such cases, as prison is regarded as the last resort in maintenance cases, is it not an abuse of the court's undoubted

power to refuse to allow a hearing in such cases? Will the Solicitor-General comment on the refusal of Winchester Court to give a hearing to my constituent, Paul Watts, in such a case?

The Solicitor-General: This is a statutory discretion vested in magistrates, and how it is exercised in certain cases must depend upon the facts and the occasion I am aware of the case to which the hon. Gentleman has referred. I understand that he has had a personal interview with my noble Friend the Lord Chancellor and my hon. Friend the Minister of State, but they have no authority to give directives to magistrates on how they shall exercise a statutory discretion.

NORTHERN IRELAND JUDICIARY

Mr. Biggs-Davison: asked the Attorney-General whether he will make a statement on the strengthening of the Northern Ireland judiciaries.

The Attorney-General: My noble Friend is satisfied that there is at present no need to strengthen the judiciary in Northern Ireland, but the position will he kept under review and further appointments will be made should they prove to be necessary. The hon. Member may like to know that very considerable progress has been made in reducing delays before the trial of defendants in the Courts.

Mr. Biggs-Davison: Is the right hon. and learned Gentleman not aware that there is concern at some very serious cases of delay between arrest and trial? Will he and his noble Friend keep this matter constantly under review? That said, may I ask him whether he thinks it appropriate that we should pay tribute to the courage and devotion to duty of the judiciary despite threats and actual assassination?

The Attorney-General: In reply to the last part of the hon. Gentleman's question, of course I entirely agree, and I am sure the whole House will agree, with what he said, particularly in the light of some of the tragic incidents which have taken place.
In reply to the first part of the question, we have kept this matter very much under review. We have been very concerned and, of course, we shall continue


to keep the matter under review. As a result of doing so, in co-operation with the judiciary in Northern Ireland and the Lord Chief Justice in particular, and others, special measures were introduced. I can give the House some figures. In September 1974 the average length of time, in weeks, between committal and trial was 22 for scheduled offences and 10·7 for non-scheduled offences. By February, those figures had fallen to 7·5 and 9·8 respectively—a remarkable reduction.

Mr. Powell: Is the right hon. and learned Gentleman aware that despite the heavy arrears, there is considerable satisfaction at the rate of progress in reducing them and that, more than is generally recognised by the public, a high proportion of the serious offences of terrorism and violence are now resulting in sentences in the courts?

The Attorney-General: Yes, Sir, that is also true. I can give a further figure. At the beginning of September last year, 633 persons had been committed and were awaiting trial. At the beginning of this month, which is the last counting day, that figure had been reduced to 203.

NATIONAL HEALTH SERVICE (CONSULTANTS' CONTRACT)

Dr. Vaughan: Dr. Vaughan (by Private Notice) asked the Secretary of State for Social Services whether she will make a further statement on the hospital consultants' dispute.

The Secretary of State for Social Services (Mrs. Barbara Castle): At the time of my last statement to the House, on 17th February, I was awaiting the profession's reaction to my letter of 11th February. Its response was to ask the Prime Minister to intervene. Copies of the correspondence between the Prime Minister and Dr. Stevenson have been placed in the Library of the House.
In his replies my right hon. Friend the Prime Minister explained that he did not intervene in pay matters because these were for the independent Review Body on Doctors' and Dentists' Remuneration, that when I put to the consultants proposals for a new contract I was doing so with the full authority of the Cabinet, and that he was willing to see the consultants' representatives on any wider

National Health Service issues as soon as sanctions had been removed. He pointed out also that by limiting their hours of work unilaterally consultants were not honouring the accepted obligations and that in consequence the interests of patients were being damaged. I regret to say that this situation is arising in many parts of the country.
As my right hon. Friend the Prime Minister has told the consultants, the Government are satisfied that sufficient common ground exists for a settlement to be reached when negotiations with the Health Departments are resumed. I hope that, having studied the Prime Minister's replies and the assurances they contain, the consultants will decide to drop sanctions and get round the negotiating table.

Dr. Vaughan: I thank the right hon. Lady for her statement, but many of us will be extremely disappointed at how little she has had to say today and at the unsatisfactory nature of the Prime Minister's replies to the consultants. The right hon. Lady will know that I am a consultant. Will she agree that nothing in her statement and her recent actions will have helped to resolve the present dispute? Does she recognise also that waiting lists are now lengthening to a most dangerous extent, and there is now the likelihood of serious damage to the care of patients in the National Health Service?
Will the right hon. Lady agree that a major difficulty is that many leading hospital consultants have no confidence in her whatever? Will she, please, not play party politics over this matter, and may I suggest to her—I say this knowing that it will not be easy for the right hon. Lady —that the most useful thing she could do now would be to put her personal feelings to one side and to reopen negotiations at once, or, failing that, will she hand over the discussions to an independent arbitrator?

Mrs. Castle: I suppose that it would be asking too much to expect a consultant to be objective about a consultants' dispute. The hon. Gentleman will, therefore, not be surprised that I reject all his propositions except the one to the effect that this dispute is damaging the interests of patients. May I ask him, in reply, to discharge his duty and call on consultants


to withdraw sanctions first, in the certain knowledge that, as the Prime Minister has stated, I have in this matter been acting not personally but with the full authority and knowledge of the Cabinet, and second, recognising that there are no grounds left that would prevent a settlement if the consultants were at least willing to show the shadows of a compromise?

Dr. M. S. Miller: Will my right hon. Friend acknowledge that, in addition to the opinion of a large number of people in the country, there is a growing body of opinion among consultants who are irritated, annoyed and impatient with the small group of consultants who put monetary advantage above the necessity to do the best for their patients?

Mrs. Castle: I think that my hon. Friend is right. We had an example of that on the television only yesterday when Professor McColl, professor of Surgery at Guy's, appeared on the programme "Weekend World" and was asked by the interviewer whether the whole profession was behind its negotiators in demanding that we drop the current differential in favour of the whole-time consultant. He was asked what he thought the reaction would be if I were to accede to that pressure, which is now almost exclusively the issue before us, and he replied:
… there would be a riot if you take away the extra payment …".
It is clear, therefore, that the profession is divided on this issue, and that in standing by the principle of maintaining the present differential I am acting in the interests of the National Health Service as a whole.

Mr. Paul Dean: Will the right hon. Lady recognise the unhappy fact that the consultants have lost confidence because of her dictatorial and unfeeling attitude? Does she realise that this dispute is not fundamentally about pay but about the freedom of the consultant—[An Hon. Member : "To make more money."] —to do his duty and fulfil his responsibility to his patients without political interference?

Mr. Harper: Anyone who believes that will believe anything.

Mr. Dean: In view of that unhappy fact, will the right hon. Lady consider the

plea which has already been put, and will she ask the Prime Minister—as often happens in similar circumstances—to set up an independent arbitrator acceptable to the consultants so that their grievances and views may be properly aired?

Mrs. Castle: I certainly realise that by the time I took office the profession had totally lost confidence in my predecessors —the hon. Gentleman and his right hon.Friend who refused even to set up a working party to examine the consultants' demand for a closed contract. The first thing I did was to set up such a working party, in response to what I felt was the legitimate grievance of consultants that hours had lengthened to a degree which could not be remunerated within the context of the present open-ended commitment. There is no dispute between the consultants and me about that.
As to the request for an independent arbitrator, I must ask, first and foremost, what such a person would be asked to arbitrate about. It could not be about pay, because that is a matter for the independent review body and is currently before it. It would, therefore, be necessary to define exactly what the arbitrator would have to arbitrate about, and that the consultants have never made clear because in their own minds they are divided and confused.

Mr. R. C. Mitchell: Is my right hon. Friend aware that in the Southampton area a small minority of consultants are acting in a thoroughly despicable and disgraceful manner? Does she know, for example, that one of my constituents who had an appointment with a consultant on 28th February had it cancelled at the last minute and an alternative date given in January 1976? Is that not a thoroughly disgraceful state of affairs?

Mrs. Castle: Such action is totally tragic from the point of view of our National Health Service, the interests of which the consultants say they have at heart. I believe that action of that kind is deplored by a large number of members of the profession itself. There is an increasing consciousness that the breach of their accepted obligations is doing violence to the medical ethic by which the profession claims to stand.

Mr. Norman Fowler: Surely the Secretary of State is not claiming that Professor McColl speaks for all the consultants.


Is her understanding of this dispute so small that she does not understand the real feelings which exists among consultants throughout the country on this issue? At this stage will she reconsider her view and either set up an independent inquiry or take some new initiative?

Mrs. Castle: Of course, no individual spokesman speaks for all the consultants. I believe this to be one of the real difficulties. There is a conflict of interest here between the whole-timer and the maximum part-timer, between the man who can and does earn large sums from private practice and those other consultants in the Cinderella areas, the neglected specialities, who depend totally upon the whole-time emolument. What I am doing now is—[HON. MEMBERS : "Nothing."] I am defending the whole time emolument. I am defending, and will defend a proper reward to those who are devoting themselves full-time to the health service in areas where there are not fat private practice pickings to be made.
The best way the Conservatives can bring this dispute to a conclusion is to condemn the intolerable behaviour being indulged in by so many consultants.

Mr. Molloy: Is my right hon. Friend aware that the banality of the current situation is reminiscent of some of those troglodyte attitudes adopted by ignorant and greedy people when the National Health Service was first established? Will she give the House an assurance—not that my right hon. and hon. Friends and I require it—that she will stick to her guns in defending this great service because other members of the health service, like the members of the COHSE, are looking to her to do so? She will have their support for her campaign, and that support will be given not merely in the health service but by all the sick and ailing.

Mrs. Castle: The answer to my hon. Friend's question is "Yes ", and in defending the health service I shall be standing by a compromise which has obtained for many years, a compromise which the consultants are now trying to breach unilaterally. On the one hand the consultants want to retain the option agreement which permits them to choose,

after having accepted an appointment, whether they will serve whole-time or only maximum part-time, and on the other hand they are trying to drop the other part of the compromise which has also given a differential in favour of the man who opted to go whole-time.
The only way out of this trouble is by a compromise. I have compromised. I suggest that before the Conservatives ask me any further questions they should read all the correspondence that both I and my right hon. Friend the Prime Minister have had with the consultants. In it they will see that I recognise the importance to the consultants of the option agreement. I am therefore not proposing to interfere with it. In return I ask them not to interfere with the present agreement on the differential. That is reasonable.

Mr. Maxwell-Hyslop: Is the right hon. and noble Lady aware that more than 10 per cent. of consultant posts are vacant, and is she aware that the trend in filling registrar appointments is becoming very dangerous? While she plays politics and refuses to do her job as Secretary of State, the National Health Service will bleed to death in both the consultant and the registrar grades.

Mrs. Castle: I am very grateful that the hon. Member for Tiverton (Mr. Maxwell-Hyslop) recognises my nobility of spirit. Of course I am aware of the recruitment problems. That is a matter currently being looked at by the review body, the independent body on pay. That is a matter for it, not for me. As I have told the House on previous occasions, my Department has given evidence to the review body supporting the increase in pay and pointing out the latest recruitment and manpower figures and the implications these have for the coming award.
I have always made clear that consultants have the right to be adequately remunerated. I am willing to negotiate with them a limited contract which would give them extra pay for the long hours many of them do. There is no difference between us on that score. I therefore see absolutely no reason why the dispute should continue a moment longer or why sanctions should be retained.

INDUSTRIAL CIVIL SERVANTS (DISPUTE)

The Secretary of State for Employment (Mr. Michael Foot): With permission, Mr. Speaker, I will make a statement on the unofficial action being taken by industrial civil servants.
As from this morning the industrial civil servants employed by the Property Services Agency on providing maintenance and services to Government buildings in the Whitehall area and to the Houses of Parliament have begun unofficial action for an undefined period. I understand that about 420 people may be involved.
This unofficial action is being taken in support of a claim by the trade unions concerned on behalf of all industrial civil servants for an interim increase pending their next annual settlement in July. The Lord Privy Seal has recently met trade union representatives to discuss the unions' claim and pointed out the difficulties involved in reconciling an interim increase with the TUC guidelines. A response to the claim can be expected soon.
My right hon. Friend the Lord President will be dealing with the possible effects of this unofficial action on the business of the House. Services to Government Departments could also be affected.
In the light of the position as I have described it I very much hope that those concerned will lift the unofficial action and return to normal working.

Mr. Prior: The right hon. Gentleman's alacrity in making a statement about a dispute which concerns the House of Commons will compare very unfavourably with his reluctance to make statements concerning disputes which affect millions of people in other parts of the country. I hope that Labour Members will appreciate the feelings of commuters coming in to London about that. Does any interim increase fall within the terms of the social contract?

Mr. Foot: Dealing with the first matter that the right hon. Gentleman raised, on the last occasion, which concerned the signalmen, I volunteered a statement to the House and Conservative Members complained when I did so. Moreover,

those who criticise me on this matter will realise why I took the attitude I took on the signalmen and will realise that it was a sensible course. On the right hon. Gentleman's second point, the difficulty about a proposal for an interim payment is that it would have breached the guidelines on the 12-month rule, and we were and still are concerned about that.

Mr. Thorpe: Will the right hon. Gentleman accept that there will be genuine sympathy for him over the regularity with which he has to come to this House and deplore unofficial strikes in support of claims in breach of the social contract to which we know he is wedded? When will the Lord Privy Seal be making a response to the claim which has been made?

Mr. Foot: The negotiations have not broken down. Discussions are continuing over the claim through the normal negotiating machinery, and that is where we say the discussions should take place. We hope that they will proceed speedily there.
As for the first part of the right hon. Gentleman's question, I am not quite sure where he stands on the social contract, and he had therefore better think up his own view before he makes comments about other people's views.

Mr. Bidwell: Does my right hon. Friend appreciate that the workers concerned feel very deeply about this issue, as is evidenced by the stoppage? My right hon. Friend gave figures of the numbers involved, but I understand that this is a solid stoppage of work throughout Whitehall. Does he accept that these workers are generally very low paid and that the position has been exacerbated by increases given to non-industrial staff? These people certainly seem to have a grievance. They were caught by the pay freeze and by phase 3, I understand from fellow members of the Transport and General Workers' Union, to whom I have been speaking. Is it not obvious that Whitehall and the Houses of Parliament can no longer rely on low-paid workers and grace-and-favour circumstances?

Mr. Foot: I certainly apppreciate what my hon. Friend says. I am sure that those who are taking this action feel


their grievance strongly. But it is also the case that they have had considerable increases since the settlement of last July. It is true that they were caught under the end of phase 3, but since then they have had threshold increases and some and possibly all of those taking action today have also had considerable increases in London weighting. [HON. MEMBERS: "That is the same "]. It is not the same. It is not the case that they have not had any increase since the July settlement.
When the July settlement was reached —and this touches on the feeling of grievance—it was agreed that there should be a joint study of the way in which the rates of pay in the industrial civil service were compared with those in comparable work in outside industry. I cannot anticipate the outcome of that study, but of course that outcome will play its part in the discussions now taking place.

Mr. Brittan: If the action today is unofficial, what steps is the union taking to persuade its members who are participating to go back to work?

Mr. Foot: The union representatives of these workers, as of other industrial civil servants, have shown a most proper respect for the procedures throughout the whole of these discussions, They have sought to secure a settlement of this matter through the normal negotiating machinery, and I think that it would be wise for those taking this action today to do the same.

Mr. Moonman: Is not the situation likely to become more acute as the custody guards on Government buildings escalate the dispute by Thursday? Would my right hon. Friend agree that to meet that claim would not be in breach of the social contract?

Mr. Foot: I should have to look at that, but I think that that would be in breach in the respect that I have mentioned. Certainly it would be most unfortunate if there were any escalation of the dispute. The discussions now taking place through the normal machinery may help to end the dispute. That is what I wish, and I am sure that that is what the whole House wishes.

HOUSES OF PARLIAMENT (FACILITIES)

The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short): As my right hon. Friend the Secretary of State for Employment has just said, the present situation is that industrial civil servants manning the PSA works depôts which look after the Houses of Parliament and buildings in Whitehall have gone on strike today. The strike is unofficial and the total number of staff involved is about 420.
Strikers are picketing the Houses of Parliament and other Government buildings in Whitehall. Certain other categories of staff, in particular those responsible for lift maintenance and the inter-departmental dispatch services, are not willing to cross the picket lines.
No major breakdowns in services have been reported and it is hoped to continue to run all essential services so that the work of both Houses will be able to continue.
Steps are being taken to provide whatever papers are essential to enable the House to function, though, as in the past, there may be some inconvenience to hon. Members.
House of Commons catering staff are working but are unwilling to light gas appliances which are normally lit by the unofficial strikers. I regret that this means that only a cold meal service is available. Coffee is available in the Members' Guest Room and will be available after lunch and dinner in the Harcourt Grill Room. Tea and coffee are available in the Members' Smoke Room.

Sir G. Howe: Is it not a fact that this is the first time that workers employed in the Houses of Parliament have themselves been the subject of pickets of this kind? Does not the progressive influx of industrial action of this kind into the Palace of Westminster itself betoken evil times for the future? If, as the Secretary of State for Employment has made clear, the claims now being discussed are themselves in breach of the social contract, will the Lord President of the Council encourage his colleagues to do something to secure a settlement of this dispute that actually upholds the social contract? Will he not also himself be prepared to strike a blow


by going to strike a light in the Tea Room to set these fires going?

Mr. Short: The reply to the right hon. and learned Gentleman's first question is that I understand, although I am not sure, that there was a previous occasion when the House was picketed.

Mr. Skinner: Is my right hon. Friend aware that some of us have attended the House of Commons today only at the insistence of those on the picket line in order to put their case in the House and that we shall continue to do so for as long as this unofficial strike lasts? The strike may become official when the union executive has considered the matter.
My right hon. Friend the Secretary of State for Employment mentioned other increases. Is my right hon. Friend aware that London weighting and threshold agreements are not part of any wage increases as such? Is he aware that this situation is a relic of the statutory incomes policy of the last Tory Government and something that we should clean up as soon as possible?
Is he also aware that although it might have been wrong for his right hon. Friend to interfere in the railways dispute, for that interference would have been Government interference in industrial free collective bargaining, as the custodian of this place my right hon. Friend should have some part not as a mediator, but in a capacity in which he can solve the problem?

Mr. Short: I am sure that, as my right hon. Friend has said, it will be the wish of hon. Members in all parts of the House that the dispute should be settled as quickly as possible. We hope that the strikers will go back to work so that the normal process of negotiation, which has not broken down, may continue.

Mr. Thorpe: Is the right hon. Gentleman aware that some of us have come to the House to represent the voters who return us from our constituencies? Would he give an undertaking that if action is taken that would impede the discharge of parliamentary functions by an hon. Member, he will immediately make a statement to that effect, because although, if we are denied hot food and lifts, we shall still be able to discharge those func-

tions, and probably be rather healthier in the process, there is a sessional order and we are getting near to seeing a breach of it?

Mr. Short: Any question of privilege would be a matter for you to decide in the first place, Mr. Speaker. You would have to say whether there was a prima facie breach of privilege and it would then be for the Committee of of Privileges, and I should not venture to comment on that. However, I understand that for there to be contempt of Parliament and therefore a breach of privilege two elements would have to be satisfied. One is that there would have to be physical obstruction real physical obstruction—and the other is that the dispute would have to be angled solely and exclusively towards impeding the work of Parliament and not just be part of a general and broader dispute. Those are the two conditions. However, it is of course initially a matter for you, Mr. Speaker, and ultimately for the Committee of Privileges.

Mr. Arthur Lewis: Is my right hon. Friend aware that this dispute could be settled within five minutes? All it needs is for him to say that the Government will treat these people as generously and as quickly as they treated the top paid civil servants and that they will give these people an increase of as many thousands of pounds as they give each year to the judges and the top paid civil servants. If he says that, they will be back within five minutes.

Mr. Short: There is machinery for dealing with the salaries of top civil servants and judges and there is machinery for dealing with the salaries of the civil servants who are now on unofficial strike. The negotiations are going on. They have not broken down. I hope that my hon. Friend will add his voice to ours in urging these people to go back to work.

Mr. Ronald Bell: If they do not go back to work, what does the Lord President propose to do about it? When are the Government going to stand up to these juvenile cowboy and Indian games of crossing picket lines and all the other nonsense? Why not face up to it and give some kind of reward and recognition to those who stand up to group action and break strikes.

Mr. Short: My job is to try to ensure that the House is able to carry out its functions and to carry on normally, and this I shall do to the best of my ability.

Mr. Frank Allaun: Is my right hon. Friend aware that these men have very good reasons for striking? They were promised an interim increase by January but they have not received it, although non-industrial civil servants have received an increase of £3 a week, plus three extra days' holiday a year, plus extra shift allowances. If non-industrial workers have received the award, why is it that industrial workers have not been given it?
Is my right hon. Friend aware that, because their wages are so low, these men are having to work on Saturdays to support their families? Is my right hon. Friend further aware that there are 6,000 men involved in London who will be called out shortly if this promise is not kept, and it has not been? It is all very well for Conservative Members to talk about inconvenience, but they have no idea of the inconvenience suffered by these men every day of their lives.

Mr. Short: My hon. Friend is wrong. No promise was made of an interim settlement. I repeat that the negotiations have not broken down. They are going on, and I hope that all hon. Members will wish the dispute to be brought to an end as quickly as possible.

Sir G. Howe :: Is it not clear that if, as the Lord President says, the Houses of Parliament are being picketed for only the second time in their history, the negotiations have in any practical meaningful sense broken down and the members concerned are demonstrating their disquiet at the failure of the negotiations to produce results?
Can the right hon. Gentleman say clearly, first, whether the claim being made is in breach of the social contract? Secondly, is the Government's position in breach of the social contract? Will the right hon. Gentleman accept his responsibility to clarify this rather cloudy document at least in this respect which affects us so directly? He must see that one side or the other is not welshing on this important document.

Mr. Short :: My right hon. Friend said clearly that an interim payment would be in breach of the 12-month rule, and that is the difficulty.

LOTTERIES BILL (STANDING COMMITTEE)

Mr. Farr: May I, Mr. Speaker, ask for your guidance on the way in which the Lotteries Bill is being put through the House? First, only 1 hour and 45 minutes was allowed for the Second Reading debate, as a result of which a number of hon. Members on both sides of the House did not have an opportunity to enter into the discussion.
Secondly, Standing Committee B, which is due to meet tomorrow to consider the Bill, is composed of 17 Members, only one of whom was against the Bill. It occurs to me that —

Mr. Speaker: Order. The hon. Member began by asking for guidance, but he is putting forward what is clearly not a matter for the Chair. We have had this out before. I must ask for the support of the House in preventing matters being put to me which are not matters of order.
It is not for me to comment on the actions of the Committee of Selection. The hon. Member has put down a motion on this. He must seek in other ways to have that matter debated. He must bring pressure to bear on his Front Bench or ask the Leader of the House about it, but the matter cannot be raised with me as a point of order because I have no power to do anything about it.

Mr. Farr: I appreciate that, Mr. Speaker, and I am most grateful to you for your guidance. The reason why it would be inappropriate to raise the matter on Thursday is that the Committee is due to meet tomorrow. By Thursday the Bill may be well advanced in Committee and it will be difficult to get its progress reversed.

Mr. Speaker: I see the hon. Member's point, but I think he must seek some other way of raising it. I heard the Patronage Secretary saying something under his breath. Perhaps the hon. Member will follow the matter up in that way.

Orders of the Day — FINANCE BILL

[4TH ALLOTTED DAY]

Order read for resuming adjourned debate on Amendment (No. 92) proposed [6th March] on consideration of the Bill, not amended in the Committee and as amended in the Standing Committee.

Clause 39

FREE LOANS, ETC.

Which amendment was : In page 30, line 35, at the end, to insert the words :
but no period beginning before 6th April 1976 shall be a chargeable period.'—[Dr. Gilbert.]

Question again proposed That the Amendent be made.

4.4 p.m.

Mr. David Howell: The House, or at least some Members, may recall that when we were rather abruptly interrupted at midnight on Thursday we were dealing with Clause 39, the free loans clause. It is a curious piece of drafting, and it has come to be known by hon. Members who have been following these things through as the lost clause in the Bill because, first, the Chief Secretary and the Financial Secretary had some difficulty in interpreting it when it came forward for discussion, and then the Opposition amended it in Committee to the point where in effect it was completely sterilised and removed from effective existence. The Chancellor of the Exchequer then postponed its operation until April of next year and when last seen was forlornly looking for a juridical formula to make the underlying aim of the clause effective again.
Our interest, besides our general interest of wishing never to see such an absurd provision in any Act on the statute book, is to deal with the undertakings given in Standing Committee by the Financial Secretary that if ever such a provision appeared on the statute book certain aspects would be protected from its more lethal effects.
There was the undertaking given in response to an amendment that gross in

terest indicated in the clause—that is, the notional interest flowing supposedly and deemed to flow from loans given at no interest or low interest—would be added to the net income of the donor, from which certain consequences follow—for example, whether that income could possibly be liable in any form to capital transfer tax, but that is for the Government to sort out.
Secondly, there was the undertaking that any loans given as part of a partnership, partnership operations or in the financing of close companies where this is customary, as I think Treasury Ministers have learned—although the drafters of the clause did not know beforehand—as part of the whole financing operation of close companies, would be protected, and will be so when a clause comes forward in April 1976 presumably in the Finance Bill of that month and when the Chancellor produces this juridical formula for which he is so desperately searching.
Those are the two undertakings and we should like them on the record so that we may be satisfied that there is no suggestion that this postponement will be long enough for people to forget about these little local difficulties and for the Government to bring back this nonsensical clause unamended, which would be very damaging.

The Financial Secretary to the Treasury (Dr. John Gilbert): The hon. Member for Guildford (Mr. Howell) has put his finger on a couple of points about which he wants reassurance, and the hon. Member for Blaby (Mr. Lawson) raised many more on Thursday evening, largely in repetition of our Standing Committee proceedings. I shall, of course, during the coming year examine all the points that I undertook in Committee to examine and I am sure that both hon. Gentlemen will accept that the Government have no intention of using the period of recollection in tranquility for resiling from any of the commitments given earlier in our proceedings on the Bill.

Mr. Nigel Lawson: I am sure the hon. Gentleman does not want to make it appear to the House that the commitment was merely to examine. In a number of cases the commitment was to table amendments on Report to meet the points that had been made.

Dr. Gilbert: The hon. Gentleman is right. The commitment varied according to the context of what we were debating, and I take the hon. Gentleman's point completely. We have met the whole range of difficulties by this Government amendment which ensures that the clause shall not come into effect until April of next year, and I am sure the hon. Gentleman will welcome that.
I could go further now if the hon. Gentleman would like me to do so. On the particular question of loans to close companies and partnerships, I am happy to repeat the categorical undertaking that I gave in Committee that the revised legislation will incorporate an exemption in accordance with the principle of Amendment No. 917 tabled in Committee. It will cover loans to close companies and partnerships where the transferor is a participator in the company or a member of the partnership, and loans to companies will not be confined to the close company situation.
The Opposition were seeking reassurance on one other point, namely, that the gross consideration for the use of a loaned asset should be treated as part of the transferor's net income or, if less than full consideration is charged for the use of the asset, the gross difference between the normal consideration and the consideration actually charged. So that we have the record straight, I will repeat what I said in Committee :
 It is considered that subsection (1)(c) must mean without further words that the amount deemed to be transferred is capable of being treated as both normal expenditure end as income of the transferor ".—[Official Report, Standing Committee A, 12th February 1975 c. 1570.]
None the less, I will again consider whether there is any need for revision of the clause to make this intended result doubly sure. It was one of the many cases in which the Opposition insisted that it all meant something different from what we insisted it meant. On many occasions my right hon. Friend the Chief Secretary and I have been at pains to lean over backwards to try to meet Opposition objections, although we did not think that the passages were ambiguous.

Mr. Lawson: Will the hon. Gentleman deal with the point made on Thursday by my hon. Friend the Member for Hove (Mr. Sainsbury) concerning dividend

waivers, which is covered by Amendment No. 438?

Dr. Gilbert: The hon. Gentleman is being uncharacteristically impatient. I intend to refer to all the items raised in our debate on Thursday.

Amendment No. 91 would deny the application of Clause 39 to the provision of dwelling houses. It goes further than Committee Amendment No. 451 in the name of the hon. Member for Blaby (Mr. Lawson). That amendment excluded only houses for dependent relatives. Government New Clause 7 exempts transfers of value for the maintenance of dependent relatives, and that exemption is available in respect of any charges under Clause 39. Therefore, there is no need for any special provisions on the lines of this amendment to benefit dependent relatives.

I referred last week to the problem of houses for employees and former employees. I intend to revert to that matter, and I shall be looking at it again during consideration of possible amendments to Clause 39.

Amendment No. 92(a) would defer the operation of Clause 39 until after 6th April 1980. It will come as no surprise to Opposition Members to learn that we regard deferment until April 1976 as going as far as we can justify. I could not recommend my hon. Friends to accept Amendment No. 92(a).

Amendments Nos. 415 and 419, broadly speaking, deny the application of Clause 39 to loans to businesses, whether or not incorporated, by persons who carry on the business or are shareholders, to business partners and to non-profit-making bodies, members of clubs and churches. I have already given an undertaking to revert to the substance of those amendments at a later stage.

Amendments Nos. 416, 418, 445 and 499—of which the only one you called, Mr. Speaker, was Amendment No. 416—all bear on the same point and provide alternative wordings. Clause 39(1)(c) provides that :
 the transfer shall be treated as made out of the transferor's income.

The amendments would embellish those words, which we consider to be sufficient in themselves. We undertook, in column 1571, to consider the point again in Committee. I remain of the view that the


words in subsection (1)(c) mean without further addition that the amount deemed to be transferred is capable of being treated as both capital expenditure and as income of the transferor. For that reason, Amendment No. 416 is not necessary.

The hon. Member for Blaby asked about Amendment No. 438, to which the hon. Member for Hove (Mr. Sainsbury) spoke on Thursday. The amendment is self-explanatory, but it is not in place attached to Clause 39. If he will look at the earlier clauses, particularly Clause 20, he will see that that is the appropriate clause to which to attach the amendment. A dividend waiver cannot be concerned with the use of money or other property without consideration. As we have gone past Clause 20, it might be convenient for me to say to the hon. Gentleman that at first sight a waiver would be caught by Clause 20(7), but there is a let-out in certain circumstances under Clause 20(4), and the chargeability or otherwise of a dividend waiver would depend on the facts of the case as covered by those two subsections.

4.15 p.m.

Mr. Peter Rees: I should like to get absolutely clear this matter of great practical significance. Suppose a person who feels that he does not need a dividend from a company in which he has a substantial interest decides to execute a waiver under paragraph (c) and no consideration moves the company. He would be conferring a gratuitous benefit on the company because its funds would not be depleted by the amount of the dividend which would be payable to him. Would that person be treated as having made a transfer to the company?

Dr. Gilbert: The answer depends upon the facts of the case. In general the intention would be that the transfer should not be chargeable, but there could be circumstances in which the waiver of a substantial dividend accrued to an individual member of the family in a close company situation. The circumstances would determine whether the waiver were chargeable.

Mr. Rees: I appreciate how difficult it is to probe these delicate matters across the Floor of the House, but I am a little disturbed about the Financial Secretary's

answer. He referred to a substantial shareholder—I cannot see why it should matter whether a shareholder is substantial—and seemed to suggest that there might be a transfer not to the company but to the other shareholders who took their dividends. That alarms me a little. Would the Financial Secretary be kind enough to elaborate on that?

Dr. Gilbert: This is very much a Committee point, but I will do my best to assist the hon. and learned Gentleman. The essence of the matter is that if the effect of the waiver were to create a considerable benefit for another shareholder, which could happen in a close company situation where there are few shareholders, a chargeable transfer could be deemed to have taken place. I cannot go into the matter in greater detail because it depends on the facts of the case, as I am sure the hon. and learned Gentleman appreciates.

Mr. Rees: Is the hon. Gentleman referring to a benefit to the shareholder or to the company?

Dr. Gilbert: I was referring to a benefit to a shareholder. Where a close company is virtually owned by three or four people, if one shareholder waived a dividend the major part of the benefit would fall to another shareholder, as distinct from the situation which obtains in a public company with many shareholders. This would depend on the circumstances on each case.

Mr. Nicholas Ridley: Surely that would not be a transfer of capital but a transfer of income. The shareholders who benefited would have a larger income and would therefore be liable to larger income tax. How can the Government claim that the transaction which my hon. and learned Friend has described is a transfer of capital? It is surely a transfer of income. That is why I maintain that this clause should not be in the Bill. It is a clause which taxes income.

Dr. Gilbert: The hon. Gentleman is flogging a horse that has been flogged quite a bit. He has already raised this point about whether the clause should be in the Bill and whether it is in order. He has done so many times and it has been found to be in order many times. I do not think it is profitable for me to


follow that point yet again. The question is whether there is an intention to convey a gratuitous benefit. If there were such an intention by the exercise of a waiver, there would be a liability to capital transfer tax. It all depends on the facts of any individual case and whether the intention to create a gratuitous transfer was paramount.

Mr. Tim Sainsbury: In view of the difficulty we are having on this point
I wonder whether the Financial Secretary would agree to look at it again and see whether he can find some form of words which would make the situation clearer to shareholders, companies and their financial advisers.

Dr. Gilbert: Whenever I say that I will look at something again I am castigated by the Opposition for not understanding the Bill. I understand the Bill very well. I am prepared to look again at the matter. The relevant part of the Bill to which this amendment should attach is Clause 20. I do not think we can advance consideration of the point later. If the hon. Gentleman would like to write to me about any set of circumstances he has in mind I would be happy to look at it.

Mr. David Howell: I promise not to castigate the hon. Gentleman again but may I ask him whether, in the examination which will take place before this is brought forward in April 1976—with the juridical formula—there could be new definitions or explanations underpinning the clause, explaining to the lay and expert public how it is that if Clause 1(c) says that the transfer should be treated as made out of income from the transferor and Schedule 6 says that if it is made out of income it is exempt, chargeable transfers can arise under the clause? This is bound to puzzle anyone who tries to following our proceedings outside.

Dr. Gilbert: As I have said in Committee, the Inland Revenue produces a massive and comprehensive set of explanatory notes to the Bill. It intends to produce a revised set of notes to take account of the amendments made in Committee. I am sure that it would be possible to cover the point made by the hon. Gentleman. I think that is all I

need to say at this stage except to commend Amendment No. 92.

Amendment agreed to.

Clause 40

ANNUITY PURCHASED IN CONJUNCTION WITH LIFE POLICY

Amendments made: No. 93, in page 30, line 38, leave out ' 26th' and insert 27th '.

No. 95, in page 31, line 25, leave out ' 26th ' and inset 27th '.— [Dr. Gilbert.]

Clause 42

ASSOCIATED OPERATIONS

Amendment made : No. 97, in page 32. line 21, leave out 26th' and insert 27 '.— [Dr. Gilbert.]

Mr. John Nott: I beg to move Amendment No. 539, in page 32, line 32 at end add—
' (4) Where a transfer is made between spouses, then any two or more operations including that operation shall not be associated operations if they would not have been associated operations but for the transfer between spouses '.

Mr. Speaker: With this it will be convenient to discuss the following amendments :

No. 706, in page 32, line 32, at end insert—
' (4) The foregoing provisions shall not apply so as to make any transfer of value a chargeable transfer where that transfer is by one party to a marriage to the other and that other party subsequently or previously has made a transfer of value of an amount equal in value to the first mentioned transfer '.

No. 234, in Schedule 6, page 94, line 43, at end insert—
' (5) An arrangement between two spouses to enable each to contribute £5,000 as a gift within sub-paragraph (2) shall not be treated as an associated operation for the purposes of this Part of this Act '.

Mr. Nott: I thought that some of the confusion surrounding Clause 42 had arisen as a result of the original Press notice issued by the Inland Revenue, to which the Chief Secretary referred in Committee. The right hon. Gentleman admitted then that it had been a little misleading. Although I did not serve on the Committee I have read the passage in question. The Chief Secretary assured the Committee that transfers involving


husband and wife would not be associated operations for the purpose of the Bill.
Until a few moments ago, when I saw a letter written by the Chief Secretary, dated 7th March, to my hon. Friend the Member for Gloucestershire, South (Mr. Cope) we had hoped that this would be a short debate. That letter has raised the whole question yet again and we shall have to start where we began the debate in Committee. During the course of the Bill the Chancellor has constantly made it clear that he has no wish to inhibit transfers between husband and wife. On many occasions he has emphasised the great benefit the Government are giving to the community generally by allowing these transfers in a more generous way than was the case hitherto.
Many delegations have been to see Treasury Ministers. I take one example, the delegation from the CBI which was concerned about small businesses. I can speak only on the basis of hearsay since I was not present. This delegation, like others, has been told by the Chief Secretary or other Ministers that if only the business man arranges his affairs in a sensible way and takes full advantage of the avoidance devices, which Treasury Ministers are prepared to explain to the business man, the full rigours of this tax will be much mitigated.
When Ministers speak from the Treasury Bench they constantly sound off about the evils of avoidance and how they are doing their best, as public-spirited citizens, to stop these loopholes. On the other hand, when delegates see Ministers they are told of the ways in which liability for capital transfer tax can be mitigated. The transfer between husband and wife has been demonstrated on several occasions as being one of those means. I shall not be breaching any confidences if I say that in private meetings my hon. Friends have an expression known as the "Gilbert and Sullivan Shop." I understand this to be a shorthand expression for explaining the kind of transactions which the Government understand might go on to minimise capital transfer tax liability. In spite of what was said in Committee a nagging doubt remains about Clause 42 which is much aggravated by this letter, to which I shall refer.
Treasury Ministers come and go, some rather faster than others, but the Inland Revenue's obsession about tax avoidance goes on for ever. Frequently its obsession about stopping up the tax avoidance loopholes leads to considerable fall out that is contrary to the interests of the ordinary taxpayer. The right hon. Gentleman may be certain of the Government's intentions on Clause 42 but in some mysterious way, as has often happened in the past, we may find the Revenue, in subsequent years when new Treasury Ministers have taken office contesting some transactions between husband and wife. In that situation the Inland Revenue may convince those new Ministers that what they are doing is fully within the terms of the clause.
I turn to the Chief Secretary's letter received today. It is confusing. It says:
 In a blatant case where a transfer by husband to wife was made on condition that the wife should at once use the money in making gifts to others, a charge on a gift by the husband might arise under the clause.
If there is a condition in the transfer, the situation could arise where Clause 42 might override paragraph 1 of Schedule 6. Where there is a condition, we are perhaps moving nearer to the "associated operations" type of case. The letter continues :
It might even arise apart from the clause because in that case the wife would be a mere conduit pipe for passing the husband's gifts to their intended recipients.
That was obviously drafted by the Inland Revenue. The Chief Secretary has been extremely busy and may not have had as much time to devote to the study of this letter as he would have liked.
4.30 p.m.
There is a definite distinction between what is contained in Clause 42 and what we are being assured by Treasury Ministers. We must sort out that difference in this short debate. The letter continues:
 There would, however, be no question of invoking the concept of the 'associated operation' so as to treat a gift made by a wife as one made by her husband merely because the wife's assets had come from her husband.
That is all right, but a general paragraph is included to ensure that the Revenue can always go for a situation it does not like. The letter continues:
You will, I am sure, accept that there will, however, be other and more complex situations involving transactions between husbands,


wives and others where the Revenue would wish to invoke Clause 42.
I am sure they would, but it is vital to have two assurances from the Chief Secretary. The first is that in no circumstances wil transfers between husband and wife be caught under Clause 42 unless the right hon. Gentleman can give us very specific examples where that general undertaking might have to be broken. Furthermore, I hope that he will be able to show the exact connection between Schedule 6, paragraph 1(1) and Clause 42.
In the Bill this matter is mentioned in the final three lines of Schedule 6, paragraph 1(3). I have read those three lines over and again and find them obscure. We seek an undertaking from the Chief Secretary so that we shall know whether in future years the Inland Revenue could come down on such a transfer.

Mr. Peter Rees: Despite the limpid, not to say deathless, prose of the Chief Secretary's letter to my hon. Friend the Member for Gloucestershire, South (Mr. Cope), I must admit that I am confused and not a little alarmed. I understand from the letter that if a wife is acting as no more than a conduit pipe—a well-worn phrase but a somewhat unattractive one as applied to the relationship between husband and wife—in other words, when the wife is acting as no more than an agent of her husband, naturally the gift must be a gift by the husband. However, I am a little confused, and I hope that the right hon. Gentleman will be able to assist the House on how far motive creeps into the test.
I have done the best I can in construing Clause 42, and by a sudden flash of recognition I recognised that it derived from Section 478 of the Income and Corporation Taxes Act 1970 and that it had an even longer and more dishonourable history than that. In that section there is an overriding protective subsection letting out such transactions if it can be demonstrated that the person involved had no fiscal motive. I cannot detect that overriding protection in Clause 42. We are told that "associated operations" means
… operations which affect the same property, or one of which affects some property and the other or others of which affect property which represents, whether directly or indirectly, that property…".

I should like to ask how motive comes into that provision if there is a mere physical connection between properties involved in a series of transactions. It seems to me that if there is an associated operation the consequences to the unwitting taxpayer could be incalculable.
I should like to put two examples to the Chief Secretary. Suppose the right hon. Gentleman were to approach me for a loan and were to say "I wish to set up a settlement in favour of my family. I wish to put funds into it, but it will involve my realising some securities. which, in the depressed state of the present market, I do not wish to do. Will you cover me for three months?" Knowing the good will that exists between the Chief Secretary and myself, after our long exchanges upstairs, I might say "Yes, I shall make a loan to you interest-free" in the knowledge that he would use that as the nucleus of a trust fund for his children. I hope that I would be innocent of any tax avoidance motive in involving myself in that transaction, but in that situation would I be regarded as having made a transfer to the Chief Secretary's children? If so, will he tell me by how much?
It might well be that the Chief Secretary would endorse my cheque to the trustees and say "Here is your trust fund ". It seems to me that one would have two operations affecting the same property On a strict reading of Clause 42, that would seem to involve a transfer between me and the beneficiaries of the Chief Secretary's settlement. Is that what he intends?
Let me put to the right hon. Gentleman an even simpler transaction. Suppose he approaches me and says "I wish to buy a Rolls-Royce Corniche. My official salary will not, however, cover it in the immediate future. Will you make me a loan of £10,000?" I reply "Certainly", and make him out a cheque for that sum, which he endorses over to the motor car dealer. Admittedly, the Chief Secretary does not intend to confer any gratuitous benefit on the motor car dealer, but I wish to confer a gratuitous benefit on the Chief Secretary because I am making him an interest-free loan. Again those two operations affect the same piece of property. Between myself and the Chief Secretary there is a gratuitous transfer, whereas there is no such transfer between


the Chief Secretary and the dealer. How-over, as I understand Clause 42, they must be linked together. Because I am not entirely innocent of tax avoidance, and because I wish to benefit the Chief Secretary, does that operation corrupt and taint the second limb of the transaction? Do I find myself in the absurd situation that I have made a capital transfer to the motor car dealer? That is perhaps an extreme case, but we are entitled to have a clearer demonstration of the limits of the clause than we have had so far.

The Chief Secretary to the Treasury (Mr. Joel Barnett): In reply to the remarks of the hon. Member for St. Ives (Mr. Nott), I should like to point out that the only funny thing about the Gilbert and Sullivan shop is that the Opposition have made it fundamentally clear to us that they have no real understanding or conception of small shops and their problems over capital transfer tax. I am sorry the hon. Gentleman is confused because he knows how I hate to see him confused. I certainly hate to see the hon. and learned Member for Dover and Deal (Mr. Rees) confused because it makes his skin pucker and go red. That hurts me terribly.
In Standing Committee we were given a vast array of examples by the hon. and learned Gentleman. It is possible to give innumerable examples relating to CTT or to any other tax to make it sound confusing. I am sorry if in presenting examples the Opposition have so confused themselves that they have made it difficult for themselves to understand the tax.
I shall give only one example to show the purposes of the clause. I come immediately to the serious point that has worried a number of people about associated operations in relation to husband and wife situations. There were some misunderstandings because of what happened over the Inland Revenue Press notice. Therefore, I want to give the necessary assurance.
I assure the hon. Member for St. Ives that I read the letter to his hon. Friend the Member for Gloucestershire, South (Mr. Cope) before signing it—indeed, before it went for typing a second time —so I am well aware of its contents.
I want to explain the reason for the clause. As I said in Committee, it is reasonable for a husband to share capital with his wife when she has no means of her own. If she chooses to make gifts out of the money she has received from her husband, there will be no question of using the associated operation provisions to treat them as gifts made by the husband and taxable as such.
In a blatant case, where a transfer by a husband to a wife was made on condition that the wife should at once use the money to make gifts to others. a charge on a gift by the husband might arise under the clause. The hon. Gentleman fairly recognised that.
I want to give an example of certain circumstances that could mean the clause having to be invoked. There are complex situations involving transactions between husband and wife and others where, for example, a controlling shareholder with a 60 per cent. holding in a company wished to transfer his holding to his son. If he gave half to his son, having first transferred half to his wife, and later his wife transferred her half share to the son, the effect would be to pass a controlling shareholding from father to son. The Revenue would then use the associated operations provisions to ensure that the value of a controlling holding was taxed.
I hope that that is clear to the hon. Gentleman, and that he will recognise that that kind of situation could arise if the clause could not deal with it. That is basically the reason for the clause. The amendent would prevent a tax charge on the value of the controlling holding.
This is the main reason why I cannot recommend my hon. Friends to accept the amendment. I hope that the hon. Gentleman will not press it, because if it were put on the statute book the result would be that a controlling shareholder would not be taxed as such. I do not believe that that is the hon. Gentleman's intention, whatever he thinks about the tax.
Transfers between husband and wife will not be liable to the tax except in certain circumstances of the kind that I have outlined.

Mr. Peter Rees: The right hon. Gentleman has not done me the courtesy of


dealing with the rather simpler examples which I gave, and which I hope exemplify some of the difficulties of the clause. I hope that he will address his mind to them. I am still not entirely clear how far motive comes into the matter in the example the right hon. Gentleman gave in answer to my hon. Friend the Member for St. Ives (Mr. Nott).
If a father gives 50 per cent. of his shareholding to his son and 50 per cent. to his wife, and later the same 50 per cent. is passed on by the wife without intent to avoid tax, is that regarded as blatant because the property can be identified, or is motive the paramount test? The right hon. Gentleman should be a little more helpful than he has been so far.

4.45 p.m.

Mr. Barnett: I do not expect the hon. and learned Gentleman to be fair and reasonable, or to make me any interest-free loans, nor do I expect to make such loans to him. I thought that I had been fair, and that I had clearly explained where a situation could arise in which a transfer of a controlling shareholding would not be taxed as such if the amendment were carried. At present we are not considering motive and whether it is done perfectly innocently. The motive comes up quite separately on the donative intent. That is a separate issue, which does not come under the clause. We are talking about associated operations. If the clause were not there, certain transfers of controlling interests in companies could be made without being taxed as such. I have given an example which clearly shows how that can happen.
Unless hon. Members can explain to me a situation in which that transfer of the controlling shareholding would not be taxed otherwise than as a controlling shareholding under the amendment, I shall not he inclined to accept it. The onus must be on them to prove to my satisfaction and that of the House that the amendment would do other than I have suggested.

Mr. David Howell: This is an important matter. We have no interest in prolonging the proceedings, but what the right hon. Gentleman has just said will be read carefully outside the House, and it is vital that we have it clear.
The right hon. Gentleman spoke about a gift from a mother to her son which

gives the son a controlling interest in a firm in which his father had previously had the controlling interest, the father having given him half. The Chief Secretary said that as the mother's gift meant that the controlling interest passed into the son's hands, a chargeable event would have taken place when, some years before, the husband gave half the controlling interest to his wife, having previously given half the control to the son, or even if he gave it afterwards. I ask this not to make debating points, but in order to have the matter clear for the outside world. Are we to deduce that it is by the transfer from mother to son in later years, which is a chargeable event in its own right, that the chargeability of the transfer by husband to wife in previous years will be judged, and that the question whether liability to tax will arise will he determined by that?
Is that exactly what the Chief Secretary is saying?

Mr. Barnett: There will be circumstances in which a husband and wife each transfer a half where there would be no liability under the clause. I can recall companies that started from scratch under the joint ownership of husband and wife, each perfectly legitimately holding 50 per cent. of the shares. In those circumstances, there would be no problem.
But we are talking about an associated operation of the kind of which I gave an example, where the father had a clear intention to avoid paying tax on the transfer of a controlling shareholding.
I hope that that is clear, or that it will be clear to hon. Members when they have an opportunity to read the example I have given of the kind of situation that would be caught by the clause.
There are ordinary, perfectly innocent transfers between husband and wife. For example, where a husband has the money and the wife has no money—or the other way round, which happens from time to time—and the one with the money gives something to the other to enable the spouse to make a gift to a son or a daughter on marriage, that transaction would not be caught by the clause. It would be a reasonable thing to do. I have made that clear in Committee upstairs, and I make it clear again now.
We are talking only of the sort of operation of which I give an example.


In general, my assurance stands. I do not go back on the assurance which I gave in Committee and which I have repeated today.

Mr. Graham Page: If I may say so, the Chief Secretary has put a very reasonable case. I say that in no patronising manner. I understand exactly what he intends to happen, but the fact is that his intention does not appear in the clause. As Clause 42 stands, a transaction between husband and wife and the wife making gifts to a third party would be, to use the clause literally, an "associated operation ". Therefore, something more than an assurance from the Chief Secretary is required.
I cannot see how the courts could operate this clause in the reasonable manner adopted by the Chief Secretary in explaining its intention. There are occasions when the wife is being used merely as a pipe when there is a transfer from husband to wife and then wife to third party so that some transaction goes on which would otherwise be chargeable. I know that it is difficult to define such an operation. I know that it is difficult to draw the line between the associated operation, which is not to be taxable, and the operation which is to be taxable.
I ask the Chief Secretary if in some way he can put what he has told the House into reasonable language as an extra-statutory concession. There must be something for those who are concerned in these transactions to turn to so that they may know where the line is drawn. If I may say so, the right hon. Gentleman has drawn the line very reasonably today, but that is not in the clause. If a case comes before the courts the literal interpretation of the clause will be that transactions from husband to wife, or wife to husband, and then to a third party will be chargeable. I ask the right hon. Gentleman to consider putting his intention into words. Even if they did not appear on the statute book there would at least be available an extra-statutory concession so that people could understand the position.

Mr. Ridley: Supposing a husband has an 80 per cent, holding in a business and he gives 40 per cent. to his son and 40 per cent. to his wife, and the Revenue

classes that as a collective operation and charges him the full rate of tax under the clause. Supposing at a later stage the wife does not give her share to the son but gives it instead to her boy friend. Obviously the first transfer to the wife in those circumstances should not have been charged. Is there provision for repayment of the tax in those circumstances?
There will be occasions in many other aspects of the tax when repayment will be due. Nowhere do I see in the Bill an opportunity for the Revenue to make repayment where tax has been overcharged. I know that this is not an appropriate moment to raise such a matter, but there are few perfect moments when considering a guillotined Bill as badly put together as this one. Would it be right in such circumstances—and there are similar circumstances which I could describe, but I would be out of order in doing so—for repayment to be made where tax had been overcharged on certain assumptions which were not later fulfilled?

Mr. John Cope: I am grateful to the Chief Secretary for writing to me on this subject in answer to my letter to him. I am grateful to him for setting out his views. They have been helpful to me in trying to understand what is in the Government's mind.
I find the Chief Secretary's assurance to be reasonable and satisfactory, but, like other of my hon. Friends, I do not think that the right hon. Gentleman's assurances can be found in the Bill. The right hon. Gentleman said, if I noted his words correctly, that where there is a gift to the wife and on the marriage of the son or daughter the wife passes it on to the son or daughter, the wife is then being used as a pipe. Certainly there would be an intention—that is the word that he used in another connection —that the gift should be handed on. Therefore, it would be caught by the clause. The right hon. Gentleman is relying on intention. He is also relying on motive. That is the same thing in another context. He assured by hon. and learned Friend the Member for Dover and Deal (Mr. Rees) that he does not wish to rely strictly upon the clause.
It seems that the clause leaves a lot of discretion with the Revenue. I


appreciate that it is difficult, as my right hon. Friend the Member for Crosby (Mr. Page) said, to frame in legislation what the House or the Government desire, but I dislike the more discretionary arrangements that crop up in our tax law. I do not pretend that it is a unique feature ; none the less, I dislike the more discretionary arrangements which occur. I would much prefer the Chief Secretary to say that he will consider making an amendment to the tax in a future Finance Bill, preferably the one that we are to have, unfortunately, in a few weeks' time.

Mr. Joel Barnett: Perhaps I may speak again with the leave of the House, Mr. Deputy Speaker. First, I say to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) that I always enjoy his examples. He always gives us some interesting ones. His example of a husband with an 80 per cent. holding is similar to the one that I put forward. In the hon. Gentleman's example, 40 per cent. is given to the wife and 40 per cent. is given to the son. The wife, instead of giving her 40 per cent., as was presumably intended, to the son, leaves her husband and gives it to her boy friend. That is an interesting situation that might or might not arise.
As I understand it, Treasury Ministers generally never like to give an answer to the kind of example that the hon. Gentleman always seeks to bring before us. On the first transfer there would be no problem. The husband transfers 40 per cent. to his son. No problem would arise on that. At a later stage much would depend on the nature of and the intention behind the transfer. I cannot go beyond that. We could go on for ever with extreme examples of all kinds. The hon. Gentleman's example could, I suppose, be described as reasonably extreme. I am not sure whether the wife's boy friend would wish to have a minority interest in the family business. However, that is another matter. On the other hand, I suppose that he might wish to have such an interest. Very interesting thoughts are brought to mind as to what could happen in those circumstances.
Next, I turn to the point made by the hon. Member for Gloucestershire, South (Mr. Cope) and the right hon. Member for Crosby (Mr. Page). It is true that the interpretation of clauses is always a difficult matter. Clauses in a Bill never include

examples or the Chief Secretary's speeches. They would be rather long if they did. I know that all too often what we do in the House gives the lawyers a marvellous time in interpreting clauses and sections when relevant cases eventually appear before the courts.
Of course, it is not possible to imagine the enormous range of possibilities that lie behind these matters. Not every one has the imagination of the hon. and learned Member for Dover and Deal (Mr. Rees) or the hon. Member for Cirencester and Tewkesbury. I am obliged to hon. Members for saying that they felt that I had given an appropriate assurance and that I had been reasonable. Like many hon. Members, I am not happy about extra-statutory concessions. However, between now and next year we shall consider the matter and determine whether the interpretation could be other than that which I have given to the House. As I understand it, the interpretation which I have placed before the House is a rational understanding of the clause. If that is not the position, I give an understanding that I shall see whether it is possible to make the position even clearer.

5.0 p.m.

Mr. Nott: Our problem is that the courts do not have the Chief Secretary's speeches or undertakings before them when they decide upon clauses of this nature. That is why we are so concerned that Clause 42 should not slip through without examination. It is a very good example of a case where the vigilance of this House is crucial in Finance Bill debates.
When I was in a comparatively menial position in the Treasury, I had endless problems with interpretations of what was Section 28 and is now Section 460. I remember what happened when it was the other way round. Undertakings were given by a Minister from the Dispatch Box. The problem was to try to decide what the law was and not what undertakings Treasury Ministers had given.
I listened to my right hon. Friend the Member for Crosby (Mr. Page) with great interest. Rather than suggesting any extra-statutory concessions, would it be possible for the Revenue to issue another notice attempting to clarify this whole matter for the business community and


for professional advisers? It seemed as if there would be some distinction made between innocent motive and culpable motive. Apparently it will be innocent motive where a husband transfers property to his wife in order to reduce the capital transfer tax on a subsequent disposition to the children, but it will be culpable motive falling under Section 42 if an attempt is made by a similar transaction to avoid tax on a controlling shareholding.
This places professional advisers and others in an extremely difficult position. I should be grateful if the Chief Secretary could arrange for that.

Mr. Joel Barnett: As we have indicated already, the Revenue will be issuing a statement on all the clauses after we have Third Reading. It will include in that some clarification of this point.

Mr. Nott: Then, in the circumstances, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 43

PERSONS TREATED AS DOMICILED IN THE UNITED KINGDOM

Mr. Joel Barnett: I beg to move Amendment 100, in page 32, line 41, leave out from Kingdom ' to on ' in line 42.

Mr. Deputy Speaker: With this we are to consider Government Amendment No. 104.

Mr. Graham Page: I think that this amendment needs a little explanation. It proposes to leave out some clauses which define "United Kingdom ".
Does the omission of these words mean that "United Kingdom" includes or does not include the Channel Islands and the Isle of Man?

Mr. Joel Barnett: These amendments ensure that the availability of a dwelling house for a person's use shall be disregarded for the purposes of deciding

New Schedule

RELIEF FOR WOODLANDS

' Nature of relief


5
1.—(1) Subject to the following provisions of this Schedule, where any part of the value of a person's estate immediately before his death is attributable to the value of land in the United Kingdom on which trees or underwood are growing but which is not agricultural property within the meaning of Schedule 8 to this Act, and the conditions

whether a person was resident in the United Kingdom under the 17 years out of 20 test in Clause 43(1)(b. The first amendment is merely a drafting amendment which paves the way for the main amendment. Amendment No. 104 introduces a new subsection identical in its effect and almost identical in terms to Amendment No. 929 moved in Committee by the right hon. Member for Crosby (Mr. Page), which I said that I accepted in principle. These amendments meet that commitment.

Mr. Peter Rees: Does this mean that the Revenue will apply purely the 90 day per year test—in other words, if over a period of years a person is in this country for 90 days each year he will be regarded as resident even though he does not have a house available for his occupation?

Mr. Joel Barnett: The answer is "No."

Amendment agreed to.

Further amendment made : No. 104, in page 33, line 4, at end insert :
'(1A) For the purposes of subsection (1)(b) above the question whether a person was resident in the United Kingdom in any year of assessment shall be determined as for the purposes of income tax, but without regard to any dwelling-house available in the United Kingdom for his use.'—[Mr. Joel Bartlett.]

Clause 44

DEEDS OF FAMILY ARRANGEMENT, ETC.

Amendment made: No. 832, in page 33, line 30, at end insert—
` (5) In relation to a death occurring before the passing of this Act but not before 10th December 1972 subsection (1) above shall have effect as if the reference to a deed of family arrangement or similar instrument made not more than two years after the death were a reference to such a deed or instrument made not more than two years after the passing of this Act '.—[Dr. Gilbert.]

Clause 46

ABOLITION OF ESTATE DUTY AND TRANSITIONAL PROVISIONS

Amendment made : No. 110, in page 35, line 6, leave out 25th ' and insert 26th '.—[Dr. Gilbert.]

stated in paragraph 5 below are satisfied, then, if the person liable for the whole or part of the tax so elects—



(a) the value of the trees or underwood shall be left out of account in determining the value transferred on the death; but


10
 (b) tax shall be charged in the circumstances mentioned in paragraph 2 below in accordance with paragraph 3 below.


(2) An election under this paragraph must be made by notice in writing to the Board within two years of the death or such longer time as the Board may allow.


Tax chargeable on disposal of trees or underwood


15
2.—(1) Subject to the following provisions of this paragraph, where, under paragraph 1 above, the value of any trees or underwood has been left out of account in determining the value transferred on the death of any person, and the whole or any part of the trees or underwood is disposed of, whether together with or apart from the land on which they were growing, then, if the disposal occurs before any part of the value transferred on the death of any other person is attributable to the value of that land, tax shall be charged in accordance with paragraph 3 below.


20



(2) The person liable for the tax chargeable under this paragraph shall be the person who is entitled to the proceeds of the sale or would be so entitled if the disposal were a sale.


25
(3) Sub-paragraph (1) above does not apply to a disposal made by any person to his spouse.



(4) Where tax has been charged under this paragraph on the disposal of any trees or underwood tax shall not again be charged in relation to the same death on a further disposal of the same trees or underwood.


Basis and rate of tax chargeable under paragraph 2


30
3. Where the value of any trees or underwood has been left out of account in determining the value transferred on the death of any person and tax is chargeable under paragraph 2 above on a disposal of the trees or underwood, it shall be charged on the following amount, namely,—


35
(a) if the disposal is a sale for full consideration in money or money's worth, on the net proceeds of the sale; and



(b) in any other case, on the net value, at the time of the disposal, of the trees or underwood;


40
and at the rate or rates at which it would have been chargeable on that death if that amount, and any amount on which tax was previously chargeable under that paragraph in relation to the death, had been included in the value transferred on death and the amount on which the tax is chargeable had formed the highest part of that value


Credit for tax charged under paragraph 2


45
4. Where a disposal on which tax is chargeable under paragraph 2 above is a chargeable transfer, the value transferred by it shall be calculated as if the value of the trees or underwood had been reduced by the tax chargeable under that paragraph.


Conditions of relief


50
5.—(1) The conditions referred to in paragraph 1 above are that the deceased either was beneficially entitled to the land throughout the five years immediately preceding his death or became beneficially entitled to it otherwise than for a consideration in money or money's worth and, subject to sub-paragraph (2) below, that—



(a) if the land is situated in Great Britain, the land is managed in accordance with a plan approved by the Forestry Commissioners under a forestry dedication covenant or forestry dedication agreement within the meaning of the Forestry Act 1967; and


55
(b) if the land is situated in Northern Ireland, either a grant with respect to the land has been made under section 2 of the Forestry Act (Northern Ireland) 1953 or the land is managed in accordance with a plan approved under section 3(l)(c) of that Act in connection with the Planting and Maintenance of Woodlands Scheme administered by the Department of Agriculture for Northern Ireland for the purposes of those sections.


60
(2) In the case of a person dying before 1st January 1976 paragraphs (a) and (b) of sub-paragraph (1) above do not apply and, in the case of a person dying before 1st January 1981— 



65(a) the condition in sub-paragraph (l)(a) shall be deemed to be satisfied if a forestry



dedication covenant or a forestry dedication agreement in respect of the land has been offered to the Forestry Commissioners and the offer has not been refused; and


70
(b) the condition in sub-paragraph (l)(b) above shall be taken to be satisfied if a grant has been applied for or a plan for the management of the land has been submitted to the Department of Agriculture for Northern Ireland for approval and the application or approval has not been refused.

Brought up, and read the First time.

Mr. Joel Barnett: I beg to move, That the schedule be read a Second time.
I referred to this schedule one night last week and told the House broadly what it was intended to do. Since what I said on that occasion is available to hon. Members in the Official Report, it may be as well for me to leave it at that, to allow hon. Members to move the amendments which they have tabled to the schedule, and to reply to those.

Mr. Ridley: The House will welcome the fact that some relief has been made for forestry, and, although I shall be critical of the exact nature of the relief included in the schedule, any crumb of bread is better than no loaf at all. This is a small step in the right direction.
It is appalling that a totally new tax regime for an important industry like forestry should have been decided as a result of two short debates in the small hours with no consultation with the industry concerned. Instead, we have a schedule slapped down on Report which, under the timetable, it is impossible to probe in depth or to seek to amend in such a way that amendments could be made, because there is no further parliamentary consideration of this schedule after today. I am certain that the Government will have to come back to this House with a new proposal for forestry. I do not know whether the Ministry of Agriculture has been consulted. I am sure that the tree-growing interests have not been. If we are to decide our tax affairs in this way, we court disaster by getting them wrong.
Even at this late stage, I urge upon the Chief Secretary some amendments which he would do well to accept so that some confidence may return to this industry which was hit by a sort of taxation tornado when this wretched Bill was first published.
Let me make it clear first that the Opposition have never sought to find loopholes through forestry. I made that clear on several occasions in Committee, as did others of my hon. Friends. We are seeking a régime in which forestry can operate profitably and successfully and can expand. We do not seek to open up ways of avoiding the tax for those who are not foresters. I wish that the Chief Secretary had not made the accusation which I heard last week in one of the interminable debates which we had. I know of no occasion when anything said from the Opposition benches can be open to that charge, and nothing which I say now is intended to open a loophole for anyone other than genuine foresters.
It was unfortunate that the Government should send a copy of this charming letter from the Minister of State, Department of the Environment to all hon. Members. It reads :
 National Tree Week has the full support of the Government and the Department of the Environment … but depends upon the goodwill of tree-lovers everywhere for its success. The Council has asked Sydney Chapman to act as Director … You may remember that he, when an MP, campaigned successfully for the ' Plant-a-Tree in '73 ' year.
I can continue the ditty : "Plant a tree in '73, plant no more in '74, cut em' alive in '75." That will be the result of this piece of legislation.
I turn now to the amendments which I think should be the substance of this short debate. First, the amendments are not entirely as they were put down. Many of my right hon. and hon. Friends' names have been removed leaving my name against practically all, some of which 1 did not put down. However, I am happy to shoulder the burden for all the amendments which carry my name, although I had asked that some be taken off the paper. I hope that the Chief Secretary will not make any points about the curious collection of amendments under my name. I believe that there has been a printing mistake of some magnitude. I make no complaint. I am merely explaining what I think has happened.
The first group of amendments is perhaps best represented by Amendment (a), which deals with whether the value of the land upon which the forest grows should be exempt. We discussed this point in Committee. The Chief Secretary rather brushed it aside by saying that he did not believe that forestry land was worth anything, so it was not any great hardship to pay capital transfer tax on the value of forestry land. I said at the time, and I repeat, that forestry land can be worth a great deal. I think that in the West of England there are values of between £50 and £200 per acre for forestry land. I have been making some inquiries. In some areas with forests the land could be worth £300, £400 or £500 an acre.
The major problem is what valuation will be put upon forestry land in the case of a death or transfer. A valuer might say that land with a forest upon it is not worth very much, that it is the trees which carry the bulk of the value. Alternatively. if the trees were cut down or the land had never been planted and the land were returned to agriculture, he might say that it would be worth £400, £500 or £600 an acre. We need a definition of the basis upon which forestry land is to be valued. Otherwise it will be left to the capriciousness of the Revenue whether it is inclined to say that the land is worth very little or what would be bid for it. Forestry land which attracted planning permission could have a great value. What happens in a situation like that?
If the land is to be charged to tax, the concession for the trees could often be of little value. In the first 20 years of a wood's life the land is almost bound

to be worth more than the trees. If the owner who inherits a forest through transfer has to pay tax on the value of the land, he will probably have to cut down the trees to pay that tax and will no doubt attract capital transfer tax on the felling of the trees. This awful cat's cradle of tax will be enveloping. I strongly urge that the land should be exempt with the trees. If, as the Chief Secretary believes, the land is valueless, his concession is worth very little to the Treasury and virtually costs him nothing. But the concession could be worth a great deal more than nothing in other directions because damage to the industry would be avoided.
The next group of amendments is best represented by Amendments (bb) and (cc), which seek to charge to tax the value of the trees not at the time that tax becomes chargeable but at the time that the transfer was made. I may not have explained that very well. If on transfer through death the trees are worth £20,000 and 10 years later the new owner sells or cuts down the trees, I suggest that he should be charged on the value of the trees at the time of coming into possession of them, which would be £20,000, not on their value when he cuts them down, which might be very much more.

Mr. A. J. Beith: I find it difficult to distinguish between any inflationary factor in the value of an estate and the separate point of the increased value of the trees through growth between death and the subsequent payment of tax. Does the hon. Gentleman agree that it is desirable to distinguish between those two matters in the drafting of the Bill?

5.15 p.m.

Mr. Ridley: The amendments to which I am referring simply relate to the tax being charged on the value at the time of the original transfer. It is possible that 20 or 30 years later both the growth of the timber and of inflation will have contributed to changing that value. The hon. Gentleman underlines my point that is a wild guess what the value would be and what the tax chargeable at that later stage would be. We are dealing with somebody who not only cashes in his forest and goes away to spend his money but cuts it down because it is mature and


the time has come to replant. It is material to know how much value should be put upon it because that will determine how much tax is charged at that stage. That matter is strongly urged by the Forestry Committee of Great Britain. Indeed, that point is reinforced by what the Chief Secretary said on 5th March when new Clause 8 was being discussed:
 A third point is that the rate of tax in relation to woodlands will be the rate or rates which would have applied on death."—[Official Report, 5th March 1975 ; Vol. 887, c. 1605–6.]
That seems to give substance to what I am saying. In the new schedule we have a rate of tax which applies upon the sale or the felling of trees, not on death. Perhaps the right hon. Gentleman was not referring to the same point. Those words indicate to me that the right hon. Gentleman thought that the new schedule applied to value on death, not on sale.
The next point that I want to urge on the Chief Secretary relates to the rate of tax. Here we have three amendments which I should mention briefly in passing. Amendment (ii) allows the forestry estate to be separately aggregated from any other property of the donor or transferor. Therefore, when it comes to paying the tax at some later stage, that tax is lessened by virtue of the fact that only the forestry property is included in the estate.
Amendment (jj), which the right hon. Member for Down, South (Mr. Powell) will doubtless develop, proposes the mean or average, not the highest, rate of tax on the person who owns the woodland. That again would ameliorate the level of tax to be paid.
Amendment (kk) is perhaps best mentioned with this group because it explores what other taxes would be payable on the felling of mature timber. It is complicated, but at present Schedule D can be payable, and for companies corporation tax can be payable on the profits made. Presumably, capital gains tax also comes in somewhere here. The Chief Secretary would do the House a favour if he were to give a careful description of what other taxes will apply. If capital transfer tax at its penal rates is to be levied on the profits from growing trees, there is little need to levy other taxes as well. However, it is not clear to me what other

taxes will be leviable, and I hope that the right hon. Gentleman will help us by giving an exact account of them.
On the question of the taxation of whatever profit arises, I had hoped to see in the schedule the acceptance by the Government of the flat-rate tax which we come fairly near to agreeing about in Committee. I am not suggesting that the Chief Secretary has gone back on an undertaking. He never gave one. However, he seemed attracted by the idea of a flat-rate tax.
The defects of the present suggestion in the schedule are numerous. It means that the bigger the forest the higher will be the level of tax, thereby causing all forests to become very small after a certain number of generations, because every time they are cut down half of the land and of the timber will go in tax, and, therefore, not so much can be replanted. It is a measure designed to reduce the size of forests, nor for ecological reasons but for taxation reasons. That is anomalous.
As I told the Chief Secretary in Committee, the truth is that foresters do not cut down a whole forest every 100 years and then replant it. Every few years they cut down a bit of a forest and then they replant it. There are thinnings coming down every 20 or 30 years which have value and which can be sold. Every year a balance must be drawn as to the profit made. The profit can be made only from the felling of trees, and from nothing else. Every year capital transfer tax will have to be paid on the year's trading profit on the forest. This is a very odd concept because it is supposed to be a tax on capital to start with. It is standing logic on its head to have to bring in all the reliefs and all the complications of the rest of the Bill which we have discussed over the last few weeks in order to assess the size of the chargeable transfer which was represented by cutting down an acre of woodland.
The Chief Secretary knows very well that this calculation will, in fact, be done every year by every substantial forest owner if he declares a profit at all, because he will have felled trees and cashed in on their value. If the Government really mean this, it would have been better had they applied some form of income tax or corporation tax to the profit rather than capital transfer tax,


which is intended not for such circumstances but for gratuitous transfers of wealth from one party to another.
I am sorry to have detained the House for so long on these points, but they are important.
Finally, 100 years of an oak forest or 80 years of a mature softwood forest have represented capital tied up both in the land and in the trees. The interest which should have been payable on those capital investments is automatically, so to speak, ploughed back in, because very often little or nothing comes out of the investment until maturity and felling. So included in the expenses which can set against the profit which is defined in the schedule should be the interest which has been forgone on the capital which has been invested. If we are to deny that, we are to deny the servicing of the capital in forestry as well as to tax that capital to capital transfer tax on maturity. In that context certainly I mention Amendment (eee), which is an attempt to assess the interest forgone, which should not then be treated as capital and taxed under this schedule when the trees reach maturity.

Mr. Jerry Wiggin: Whilst my hon. Friend is dealing with this important question of an owner's continuing investment in a forest—that is, with his never cashing in the whole value of it—will he also comment on the fact that dedicated woodlands, which are a requirement under the schedule, require that immediately felling takes place replanting should take place? Therefore, the cash is never drawn out of forestry when it is dedicated.

Mr. Ridley: My hon. Friend is quite right. The Government have wisely allowed the cost of replanting to be deducted from the profits. What I am worried about is that the sum will have to be done each year. Each year the cost of any replanting, thinning, maintenance, fencing, and so on, will have to be set against any profit. The calculation will be extremely complicated before it will be possible to arrive at the taxable profit under this schedule.
If on top of that it is necessary to work out what capital transfers have been made by the owner, what his rate of tax is, whether he can pass something on to his wife or to his child on her marriage, the

matter will be of endless complication. Incidentally, it will be of great help for one's daughter to get married if one is a forester, because one will be able to make use of the £5,000 allowance to plant a few more trees. These calculations are nothing to do with forestry and they should not be treated in this way.
I urge all these amendments on the Chief Secretary and conclude by saying only this. Welcome though the Government's recantation is—that they do not want to expose forestry to the full rigours of the tax—the schedule is thoroughly ill-thought-out and thoroughly inappropriate to the job it was designed to do. I ask the Chief Secretary to organise discussions with the private forestry industry and with his colleagues in the Ministry of Agriculture, Fisheries and Food and with others who have a part to play in such discussions and to hammer out a new sort of relief for forestry which will meet the bill and do the trick properly.
I ask the Chief Secretary to listen to the Forestry Committee of Great Britain and the Forestry Commission together rather than to his hon. Friend the Member for Luton, West (Mr. Sedgemore) and to others of his hon. Friends who have been urging him not to go even this far.

Mr. Patrick Cormack: Invisible friends.

Mr. Ridley: Great though my respect for those hon. Gentlemen is, the broad woodlands of Luton, West and Bebington do not seem to me to have left on their minds that deep and intimate knowledge of this important industry which it is necessary to have before considering this taxation régime.

Sir John Gilmour: Much has been made during these debates on forestry about the big part that timber can play on saving imports. The Chief Secretary will agree that the decisions that we take now will not influence the size of our timber imports and our balance of payments this year or next year, because these are influenced by the number of trees which are growing now. However, those matters will be influenced by the number of trees which are planted over the next 10 or 15 years. Getting the schedule right will ensure that the right amount of trees is planted for the future. The Chief Secretary will


agree also that if the home-grown timber industry is to flourish it must have an orderly system of marketing.
One of the real troubles I see arising from the schedule is that if someone inherits an acreage of trees which are 30 or 40 years old, it might well pay him better to cut down those trees and sell them—to the pulp mill at Fort William, if he is in Scotland—rather than to allow them to go on and become of greater value, because it appears that under the schedule growers of timber will be required to pay capital transfer tax on the maximum value if they allow trees to go on to complete maturity.

5.30 p.m.

I should like to take up the question mentioned by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) who referred to a statement by the Chief Secretary, as reported in Hansard at c. 1605–6, that the rate of
tax chargeable is the rate which would have applied on death. It would be helpful to the House if, before any more hon. Members speak in this debate, the Chief Secretary would make clear exactly how he interprets this schedule which we are discussing. The Forestry Committee of Great Britain and many other forestry interests to which I have spoken during the weekend are under the impression that the rate of duty will be charged on the value of the timber at the time that it is cut down. This is not what the Chief Secretary said.

Mr. Joel Barnett: I was referring—and I thought this was clear on rereading it to the rate applicable to the estate of the man who died.

Sir J. Gilmour: I still do not think the right hon. Gentleman has helped us very much. He said that the rate of tax would be that which applied at death. All the forestry interests which have written to me say that they believe that the rate of duty will be the rate on the value of the trees as and when they are cut down.

Mr. Joel Barnett: The hon. Gentleman is dealing with two points. One is the rate applicable to the estate of the man who died and the other is the question of the value. The value is at the date of sale. There are two separate matters.

Sir J. Gilmour: The Chief Secretary says that if somebody dies and the trees are cut down the next day, the duty is assessed on their value. But if the trees are transferred to the man's successor and are cut down in 25 years' time, the capital transfer tax is assessed on the value of the trees at the time that they are cut down. The House should recognise that if we do not get over the inflation which we are suffering at the moment, irrespective of the value of the timber, and if the value of money continues to fall, not only is capital transfer tax charged on their increased value at the date of death, but tax is also charged when the trees are cut down in 20 or 25 years' time since the original owner died.
I thought the Chief Secretary said during our debates that capital gains tax did not apply to forestry. But on the basis of the value of timber 20 or 25 years after the death of the owner, I am certain that, unless we completely cure inflation, a measure of capital gains tax is being introduced as a result of the change in the approach to the taxation of forestry compared with our approach in the past.
We are not talking about trees which are growing now. We are concerned with trees which are to be planted in the future. I believe that forestry should play a very big part in the country's economy in the future. We may be fortunate enough to solve our balance of payments problem in the next 15, 20 or 25 years, in that we may not have to import the same amount of oil as we have imported in the past, and, therefore, we shall get a relief in the matter of oil imports. However, unless we adopt the right approach to tree planting now, the balance of payments situation in 20 or 30 years' time will be very much out of balance and will cause us distress and trouble.
Treasury Ministers have got out of balance in their belief that people have planted trees in order to avoid tax. When we debated the original clause on this subject in Committee of the whole House, the Chancellor of the Exchequer said that four-fifths of all private planting was carried out by forestry interests and others who were trying to avoid income tax. I wrote to the Chancellor of the Exchequer on 4th February asking whether he could tell me where this information came from. Today I received a letter from his private secretary, dated 6th March—over a month


since he made that statement in the House—saying that he was still unable to answer my question. I am sure that the Chancellor of the Exchequer got this idea because somebody said to him "There is a lot of tax fiddling in forestry and you ought to clobber it ". That is basically untrue. Having written to him in February, I cannot understand how his secretary should have delayed for over a month before saying that he did not know the answer. Did he merely pull this idea out of the air—that it was a good thing to plant trees in order to avoid tax?
I read a very good article in the Scotsman which referred to the late Professor Anderson, professor of forestry at Edinburgh University just after the war. when a good deal of work required to be done in replanting woods which had been devastated during the war. The article says:
He was among the first to point out that forestry brought capital into the rural economy and an investment once made, could not be returned. Had he been with us today he might have added that if things go wrong with, say, North Sea oil, the entrepreneurs can pull up their rigs and go or if Chrysler see too much red in a factory's balance sheet they can close it. Once the trees are in they are there and Professor Anderson emphasised how essential it was to have grants and fiscal incentives to establish woodlands.
This is a point which the Treasury Bench apparently has not appreciated. According to this article in the Scotsman, 70 per cent. of the Economic Forestry Group Owners in Scotland own 350 acres or less, so the average investment in Scotland yields a comparatively small amount of money. There are from 38,000 to 40,000 acres of forests in Scotland and the average planting held in any one person's hands is not more than 250 to 300 acres. If this is so, the contention put forward by the Treasury Bench that people plant trees in order to avoid tax cannot he true.
The forestry interests have approached the Treasury and said that they agree that it is not right that people should have the facility suddenly to make death bed purchases. The forestry interests themselves put forward the suggested periods of seven or 10 years, and now the Treasury favour a five-year period. All the reasons which the Treasury put forward for discouraging private planting have been entirely discounted. In an age of inflation, to gross up tree values

and charge at the top value will bring ruination to forestry, and the Treasury Bench should accept these amendments.

Mr. J. Enoch Powell: I shall refer to Amendments (t), (ee) and (jj) to the Government's new schedule.
Northern Ireland is a part of the Kingdom very poor in woodland, but the fate of forestry and the maintenance of woodlands there is not for that reason unimportant. On the contrary, it is vital not only that the woodland which exists should be maintained and replaced but that its area should be extended. It is to the far-sightedness of the great developers and landlords of the eighteenth century that a great part of Northern Ireland today owes what might be called its English aspect. But for them, it would be a country entirely without trees, as it was at the beginning of the eighteenth century, and we are now in a period when replanting and renewal and a deliberate forestry and woodland policy are particularly important.
There is, therefore, no less interest in this schedule and the impact of the tax upon forestry in Northern Ireland than there is in other parts of the Kingdom.
The first of our amendments, Amendment (t), is put down to secure an explanation from the Chief Secretary of the words in lines 19 and 20 of paragraph 2 of the new schedule—
…if the disposal occurs before any part of the value transferred on the death of any other person is attributable to the value of that land …".
It may well be that those words owe their presence there to a beneficent purpose, and sometimes, in endeavouring to understand them, I have fancied that I caught a glimmer of the meaning—that it might be intended somehow to avoid a double impact of the eventual taxation. But I think that the words and their effect are sufficiently obscure to justify an explanation from the Chief Secretary, and I hope that he will give it.
I come now to the point made by both hon. Members who preceded me in the debate, the hon. Members for Cirencester and Tewkesbury (Mr. Ridley) and for Fife, East (Sir J. Gilmour). The principle of the new schedule is the deferment of capital transfer tax upon the value of trees or underwood until


the time when disposal occurs. That being so, the double problem arises in handling that deferment : at what time shall the value be struck, and at what point of time shall the rate be struck?
The Government have so far given a different answer to those two questions. They propose that the value should be struck now, as it were, at the time of the disposal, but that the rates shall be as at the time of death. It is to be noted that that means not only rates in the sense in which the Chief Secretary used the term in an intervention just now—namely, the rate resulting from the composition of the value transferred at the disposal—but the rates ruling under the tax law at the time.
We are not looking forward here for a year or two, as I fear we are in much tax legislation, but we are looking forward in this legislation, if it is to make any sense, in terms of decades, and there will be big changes, or one presumes that there may well be big changes, in the rates of capital transfer tax if the tax should survive at all.
The Government have therefore been inconsistent. They have come down on opposite sides of the same fence. I think that they took the right decision when they selected the date of death for the purposes of the rate, and that should also have been the point selected for the purposes of valuation.
It has been said—for example. by the hon. Member for Berwick-upon-Tweed (Mr. Beith)—that inflation enters into this question and that a future Chancellor of the Exchequer might be loth to see tax levied in a future year upon the value at the date of a past death. To that my reply is that, since the prime responsibility for inflation rests upon the Government, or series of Governments, they cannot come back and claim against the citizen that they are entitled to mulct him for the progress of inflation since the relevant date ; namely, the death which resulted in the deferment of the charge which would otherwise have fallen due.
5.45 p.m.
We shall be wiser on this question also when we have heard the Chief Secretary's response to Amendment No. (kk) to the Government's new schedule put down by the hon. Member for Cirencester and Tewkesbury, that is, when we know how

far, if at all, capital gains tax may intervene in the ultimate sum due by way of tax upon disposal.
I propose that the relevant dates both for the purposes of valuation and for the purposes of fixing the rate should be the date at which capital transfer tax would but for this schedule have been paid namely, the death in question.
I turn now to the question of the rates. It has been said already that in working out the rate one must assume that the value of the trees or underwood when disposed of will form the top slice ; that is to say, that they will attract the highest part of the rate leviable on the estate. In this matter, I believe, there is no absolute logic to which one may appeal, as one could in my previous proposition. It is possible for the Chief Secretary to say : Here is a piece of the value transferred upon a death the capital transfer tax on which is being deferred, but when it comes eventually to be levied the Revenue will have its pound of flesh and it will put that value back where it would have been, on the top of the total pile of the value transferred at the relevant death.
That is one approach, but, of course, it is the least favourable to the interests of forestry, and it is the approach which exerts to the maximum the claims of the Treasury. Moreover, as the hon. Member for Cirencester and Tewkesbury argued, it is by no means the only reasonable approach.
The alternative is to say that a whole period of time—whatever it may be, perhaps many years—has followed since the relevant death, and now we shall levy the capital transfer tax upon the value realised at the disposal. At least, that is how the schedule stands. We would rather say that it should be levied upon the value which the trees or underwood disposed of had at the time of the death. So let us look at the tax which the value transferred, other than that of the trees and underwood, bore at the time of the death and impose that rate of tax now on this deferred portion. My hon. Friends and I have sought to achieve that result by substituting the word "mean" for "highest ". Others have sought to do it by a more complicated method ; for example, that in Amendment (ii).
We must not simply treat this provision as a means of going back to the


circumstances of the death and, as it were, reconstructing them and in so doing make the assumption that the trees or underwood would, in fact, have constituted the top slice.
My plea to the Government, therefore, is that they should not charge upon the trees and Underwood the maximum which any conceivable line of argument would produce but that, in a spirit of reasonableness and, I would even say, deliberate encouragement to forestry and the maintenance of woodlands, they should charge a mean rate upon the value of the transfer when the deferred tax is eventually imposed.
If these two amendments are made, and I think that they will be urged, in different forms, by most of those who contribute to the debate, they will represent a considerable improvement and will remove some of the remaining sense of injustice which is felt by those who have no interest in the matter but the maintenance of forests and woodlands as part of the economy and ecology of the Kingdom.

Mr. David Steel: I acknowledge immediately the debt which we all feel to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) for the work that he has clearly done on the subject and for the way that he moved the amendment.
It is extraordinary that even at this late stage someone of such an astute mind as the right hon. Member for Down, South (Mr. Powell), and a former Treasury Minister to boot, should find it necessary still to be asking the Chief Secretary questions about what parts of the schedule mean. I cannot remember an occasion when such a major new tax provision was put before the House at such a late stage in our consideration and under the guillotine. When last did we have at such a late stage such a major proposal which by its very nature attracted so many amendments that they were labelled with up to three letters of the alphabet?
The Government deserve the severest censure for the way they have handled the whole question of the taxation of forestry. There was considerable alarm among those concerned with forestry when the Bill was first published. I

expect that there are few forests in Leeds, Heywood and Royton and the other places represented by Treasury Ministers. I expect that those Ministers were under the impression that the proposals affected only a relatively small number of wealthy landowners, but that is far from the truth. In the last few months they have affected the interests of many who work in forestry, including many of my constituents, and a lot of them are not highly paid. I believe that the Government have totally misunderstood the nature of private forestry in Britain. Their activities in the last few weeks have certainly been most detrimental to a large number of people.
The only thing to be said in the Government's favour is that they have at least introduced the five-year rule for deathbed purchases. That is something which the genuine foresters have been urging on the Government for some time. The idea that the country in general, or even my constituency, is filled with plantations owned by octogenarian gentlement from the Home Counties is a long way from the truth. The loophole is being closed, and its closure we surely welcome. That does not justify the remainder of the Government's proposals, however.
The hon. Member for Fife, East (Sir J. Gilmour) was seeking to make the point that the whole of this proposed tax on forestry is, by definition, retrospective. Unlike any other form of activity I can recall, someone who is already engaged in planting trees is therefore committed, regardless of what changes the Government may make or may wish to make. He cannot unplant his trees, or the next year, as with agriculture, decide to do something else to take advantage of changed economic circumstances. He is stuck with a decision taken in good faith, and in a very real sense the Government are breaking faith with those who have for various reasons undertaken planting.
The right course for the Government, therefore, would have been to withdraw the imposition of the CTT on forestry at least until they had consulted the forestry interests. After that they could bring forward sensible and comprehensive proposals. I remind the Government that they have another Finance Bill, God help us, only a few weeks away. It is


not as though they were going to have to wait for another full year before tackling this subject.
I believe there is a need to encourage still further the home production of timber. The Government's activity has resulted in a down-turn of planting of 51 per cent. in the private sector in Scotland in the last season. Over the United Kingdom as a whole the effect of the uncertainty in this last winter has been to negative in planting terms everything that was achieved in Plant a Tree Year. It was laughable that we should have been treated over the weekend to pictures of the Prime Minister planting one tree in the grounds of Chequers, bearing in mind the wreckage which has been caused to forestry by the Government's activtities over the last few weeks.
I hope at this late stage that the Government will repent and accept some of the amendments. We shall support those amendments.

Mr. Iain MacCormick: The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) rather flattered the Members on the Government Front Bench by referring to their actions as being a small step in the right direction. Perhaps what they have done does not go as far in the wrong direction as their previous ideas, but it still leaves a tremendous amount to be desired.
As for the comments by the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel), I must emphasise that much of my party's opposition to the Government's stance on this matter stems from the fact that in a constituency like Argyll, and in many other rural areas like Scotland, forestry is the small man's business. As the hon. Member for Fife, East (Sir J. Gilmour) said, many of the holdings are very small and are not the province of the wealthy landowners. Many of the people who work on these holdings are either workers themselves or what one might consider to be small business men—timber contractors of one kind or another who have been penalised twice. They have been penalised by the blow struck at the forestry industry, and they have been penalised by the other parts of the Bill which strike a blow at small businesses.
The question of the valuation of these afforested areas is vital. It is not only illogical but perhaps wicked to say that when someone dies consideration of the trees on his estate will be held over and that the value will be set at its level 20 or 30 years later and charged to the dead man's estate. We have heard the hon. Member for Roxburgh, Selkirk and Peebles refer to retrospective taxation, but this surely brings in an entirely new principle—the taxation of someone who is dead.
Only a few weeks ago my party spoke of bringing about a "green revolution" which would be of immense value to Scotland and would enable it and other parts of the United Kingdom to enjoy the benefit of being once more a large-scale primary producer in an industry which is clearly coming into its own again. Gone are the days when one could read of learned City-based economists describing the Forestry Commission as a daft idea. Now we are appreciating the foresightedness not only of the Ulster landowners of the eighteenth century who planted trees but of the people in Britain in the twenetieth century who planted forests which in areas like mine are only now reaching maturity. What folly to wait until these trees mature and then to create the situation in which they will be felled, in which the estates on which they grow will be mismanaged, and in which the whole industry will be brought to its knees.
My party calls its forestry policy its "green revolution ". I am sorry to say that my party sees the Government's measures on forestry as the "red revolution ".

6.0 p.m.

Mr. Cormack: I hope that the Chief Secretary will realise that four parties have been taking part in this debate but that they have spoken with but a single voice, and all have urged on the Government a last-minute repentance. Because or their obsession with this deathbed nonsense, the Government have set a mantrap to catch a mouse, and it is quite ridiculous that they should have persisted with their insane endeavours. I hope that they will listen to what has been said and will realise that their schedule does not go anywhere near meeting the valid arguments advanced this afternoon.
We have here probably the best illustration to date of the extreme stupidity of rushing a major tax revolution through Parliament. That is what it is all about. We should like the Chief Secretary to explain exactly how his new schedule meets the new points that have been made and that he says the Government have accepted. I would say to the Chief Secretary in this context that it is no crime not to understand, but it is a crime to pretend to understand. That is what the Government are doing.
I hope that the Chief Secretary has had his attention drawn to the telegram sent to the Chancellor of the Exchequer on Thursday by the Scottish Landowners' Federation saying that it was
 greatly concerned at decision to assess capital transfer tax on sale value of timber instead of on value at date of death. The Government's amendment will have disastrous effects on private forestry and employment in Scotland ".
This was the point made by the hon. Member for Argyll (Mr. MacCormick), and the telegram called on the Government to recognise it.
However, lest it be thought that this is a particular group of landowners in Scotland, let me draw the attention of the Chief Secretary to the representations last week of the Forestry Committee of Great Britain referring to his statement of 5th March that the rate of tax in relation to woodlands would be at the rate or rates that would have applied on death. The committee said:
This is not so. The effect of the Government's decision to assess the tax on the sale proceeds, not as previously on the value at death, means that the tax will be paid on a value which will frequently be several times higher than at the time of the previous death …".
That, too, was a point graphically made by the hon. Member for Argyll.
This is not just a matter of the interests of the Timber Growers' Association and the Scottish Landowners' Federation. If the Government see those organisations as being beyond the pale because they represent landowners, I draw the attention of the Chief Secretary to the Association of Professional Foresters. Here are many ordinary workers who have certainly made a proper social contract with the community in the dedication with which they have pursued their extremely important industry but who have not been properly recognised.
There is the point made by Mr. Phillips, their secretary, who wrote to Members last week saying:
 Owing to the shortness of time which has been allowed between the publication of the amendments and the Debate of the Report Stage this week, we have been unable to consult Members fully ; neither have the Government made any approaches to organisations such as our own representing those employed in the private sector, who jointly with the British Foresters' Action Group represent some 10,000 people employed in the industry.
It is monstrous—and I use that word determinedly—that the Government should not have had any consultations with these organisations representing ordinary workers. The Government claim time and again that they have the interests of the workers at heart, that they wish them to have a fair deal, but the jobs of these workers are being jeopardised. As another of their leaders, Mr. Yull, reminded us, these workers have been forced by the present Government into having to contemplate emigration because they cannot see a properly secure future for themselves and their industry.
This is a silly situation because, as the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) rightly said, all the Government need to do is to take away this proposal. We are to have another Finance Bill—Heaven preserve us—in eight or 10 weeks' time. It is a fearful thought, but it nevetheless gives the Government a breathing space. There are those of us on this side of the House who are totally opposed to this tax, but all we are saying this afternoon is that at least the Government should operate it properly. If they have accepted the case for forestry being accorded special treatment, as they say they have, they should bear in mind the force of our arguments, think about it again and come back with a new clause and schedule that will meet the case so admirably made this afternoon by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), the right hon. Member for Down, South (Mr. Powell) and others.
However, if that sort of argument carries no weight with them and cannot dissuade the Government, let them be reminded in purely materialistic terms of the enormous importance of timber to our balance of payments. After oil and food, it is this country's largest import. We import more timber than does any other


country apart from Japan. In 1974, timber imports, cost £1,878 million.
If the pleas of ordinary workers and the legitimate and proper requests of the timber growers and the urgings and entreaties of hon. Members of all parties have no effect, let the Government at least think of the financial considerations and of the importance to the environment. My hon. Friend the Member for Cirencester and Tewkesbury quoted the letter of the Minister of Sport urging us all to support Tree Planting Week. I shall support it in my constituency by planting a tree on Friday [HoN. MEMBERS: "Why bother?"] My hon. Friends ask why I should bother. [HoN. MEMBERS: "He's cutting it down."] The Chief Secretary may well be performing that task if we are not careful. All that can be done by Tree Planting Year and Tree Planting Week and by encouraging the appreciation of trees is certainly being undermined by the Government's clumsy handling of this situation. It has already been said that some 30 million trees that would have been planted this winter have not been planted mainly because of the uncertainty created by the Government's tax arrangements.
I do not want to detain the House any longer because there is much more of importance to discuss this afternoon. However, without making invidious distinctions, I suggest that there is no more important debate than this, no more important topic for the country's future. Considered from the standpoint of scenic beauty, the environment, the economy, or the interests of workers, this is a subject of major importance.
Having accepted that forestry deserves special treatment, the Government should at least accept the proposal so powerfully supported by the right hon. Member for Down, South. At best they should accept the suggestion of the hon. Member for Roxburgh, Selkirk and Peebles and defer the implementation of their scheme by another eight or 10 weeks, when they will have had the chance to talk to the workers and to consider the case that we have made and then to do something constructive and sensible.

Mr. W. Benyon: I must declare an interest as a woodland owner.

I am therefore one of the toads under the harrow.
What depressed me about the Chief Secretary's speech was not what he said about the tax but rather that he seemed to think that he had secured the future of forestry in this country. That is not the case. Many effects of the tax have been mentioned—the effect on employment, environment and so on—but I wish to concentrate on the fact that replanting will be largely reduced, if not eliminated, by the tax.
Essentially, forestry is a long-term business. I have been given some interesting studies of two identical businesses, one a forestry business and the other an industrial or commercial business. Each was given the figure of £150,000 on the date of transfer, not an excessive sum in either case. When one comes to work out the tax—that is the tax on the small business on the one hand, and the tax on the forestry business on the other—one finds that the tax payable on the latter is more than double that payable on the former. This seems to me to be quite mad, because it is a tax on growth, pure and simple—growth of the trees—and those figures were worked out on a very modest rate of increase.
Some hon. Members said last week that we should not worry so much about the private sector but should let the public sector take over. I urge the Treasury Bench to have discussions with the Forestry Commission, because it obviously has no desire to take on small forestry enterprises all over the country. It is not geared to do that.
What happens under these arrangements in the case of windblow or fire? What happens to the payment of tax in those two instances? That is not clear.
What about selective forestry? Paragraph 2 of the new schedule contains the words :
and the whole or any part of the trees or underwood is disposed of ".
Am I right in thinking that if someone practises selective forestry—which is a fairly normal form of forestry in the South of England—it means that after the transfer has taken place he is taxed on a single oak tree which he fells?
What about the question of thinnings, which was mentioned by my hon. Friend


the Member for Cirencester and Tewkesbury (Mr. Ridley)? If what my hon. Friend said is right, it means that a business which is geared to a set rate of felling will find that if it has to pay tax at a rate of 50 per cent. it will have to fell double the number of trees which it had originally planned to fell, and the whole business will start to run down progressively. There is no getting away from that.
It is not clear what happens on a subsequent death before tax has been paid on the previous transfer. If the figure is completely reassessed, there could be a 100 per cent. tax on certain plantations. What should happen in these cases is that only the incremental value should be charged on the second transfer or death as the case may be.
It is essential that the land in a dedication agreement should not have to pay capital transfer tax, because to charge the tax is a breach of faith. Softwoods mature in 80 years, while hardwoods take 100 years-plus. A dedication agreement is entered into between the owner and the Government over that period, and, therefore, to change the tax base during that period is, in a sense, a breach of faith, and, therefore, the amendment dealing with this is essential.
The point has been made by nearly everyone who has taken part in the debate that the value should be the value at the date of transfer and not at the date of disposal. This is essential, because this is the real killer for a business such as forestry which has a very low rate of return.
I do not wish to detain the House for very much longer. I urge the Chief Secretary to think again, even at this late hour. It is right that he should take action on the five-year rule. This is what so many people have been urging was wrong, and action should have been taken before now to deal with it, but, as a result of these changes, the Chief Secretary is dealing essentially with genuine foresters who are trying to make a successful enterprise of forestry. If no action is taken, replanting in the private sector will disappear, and I cannot believe that that is the result desired by the Government.

6.15 p.m.

Mr. Wiggin: I shall not detain the House for more than a few moments.

I am sorry to note that again the Minister of Agriculture, Fisheries and Food is not with us. During the progress of the Bill, both in Committee and on Report, it has become abundantly clear that the interests of agriculture and forestry, which should be looked after by the right hon. Gentleman, have not been put internally as they should have been. It is becoming increasingly clear that the Ministry of Agriculture is unable or unwilling to comment on the effects of the tax on either agriculture or forestry.
There seem to be three specific points which are lacking in the new schedule, most of which has been mentioned. First, there is the failure to include woodlands if occupied with other agricultural land. The point about this was made by my hon. Friend the Member for Buckingham (Mr. Benyon) and particularly concerns some of our best hardwood trees. The isolated oak tree is a particular example. The new schedule will give a considerable incentive to farmers to fell these trees, which not only contribute a considerable amount of timber but add beauty to the countryside.
The omission of gifts inter vivos seems to be explained. I have no idea why forestry should not be alleviated on this basis. Perhaps the Chief Secretary will comment on the matter.
My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) made the point about the land on which trees grow. The argument for this is obvious, and it seems illogical not to include it.
Despite repeated requests to him to deal with it, the Chief Secretary has said nothing in answer to the point about tax evasion in forestry. By its special nature, this industry requires special tax treatment. It is a unique industry, and it is understood only by a number of people involved in it. It is clearly not understood by the Treasury.
The Scottish Landowners' Federation and other interests have put it to the Treasury that it should close the tax loophole and leave the genuine foresters alone, but their pleas have been rejected. It is estimated that about 30 million trees have not been planted because of the threat of CTT. I can only say what has been said so many times already. When a major tax of this sort is introduced without proper preparation its effects turn out in


the oddest places and can do immense damage if it is not properly considered either by a Select Committee or by some other procedure.
My hon. Friend the Member for Buckingham referred to the low rate of return in the forestry industry, and in an intervention I commented that no sooner has a tree been felled, particularly on dedicated woodland, than replanting has to take place as a requirement of the felling permit. Therefore, if one assesses the actual rate of return for a given period one finds that because of this permanent investment the figure is very low and compares most unfavourably with agriculture.

Sir John Gilmour: Was not that borne out by the Treasury memorandum which was produced two or three years ago, which said that trees were hardly worth planting?

Mr. Wiggin: We must not get diverted into an argument about the Forestry Commission, but that organisation, which is so deeply involved in tree planting, does not show a very good return on the national investment.
I admit that we are not dealing with totally altruistic people who invest in forestry, because there is a profit, but the return is very low indeed. It seems to me that both agriculture and forestry have been the victims of this tax because of the actions of unknowing and, regrettably, uncaring Ministers. The Chancellor of the Exchequer should look very closely at the points that have been made in this debate and others on these two subjects and try in his forthcoming Budget to put things at least partly right.

Sir Anthony Meyer: The Government's original forestry proposals produced something akin to panic among timber growers, with the result that there has been an estimated loss of close on 30 million trees which would otherwise have been growing for the benefit of future generations. The new schedule does something to put matters right, but, by reason of the dismay which was sown by the Government, it is grossly inadequate. The Government should have taken much more time and, above all, should have consulted many more people before proposing something which will

result in the loss of jobs and the loss of valuable raw material, and cause great damage to the environment.
I wish to speak simply as a Welsh Member whose countryside is distinguished largely by the wealth of beautiful trees, often uneconomic to their owners, many of which will be cut down unless the Government can put some heart back into timber growers.
The Emperor Vespasian assured himself of a place in the history of France because he put a tax on public lavatories. Every public lavatory in France is now familiarly referred to as a vespasienne. I should hate to think that the Chief Secretary, a most civilised and urbane man, would earn his memorial because every clump of cut down, black and rotting tree stumps became known henceforth as a Barnett.

Mr. Russell Fairgrieve: I support the amendment. It is getting near the eleventh hour, but I hope that the Chief Secretary will take notice of what has been said about it. Forestry is important for the United Kingdom, but it is even more important for Scotland, particularly in West Aberdeenshire, where it gives a lot of employment.
We are now running an import bill of some £2,500 million for forestry, which is approaching the size of our oil deficit and the cost of our food imports. Yet the Government here are taking action which mitigates against the production of more trees in this country. Although in Britain, and especially in Scotland, there is so much room available for forestry, Britain has a smaller forestry percentage per acre than nearly every other country in Europe. That is a ridiculous state of affairs. We should be giving encouragement to forestry, not discouragement.
Reference has been made to the telegram which has been received from the Scottish Landowners' Federation. The federation has also brought to our notice a list of curtailed or abandoned investment projects brought about by the threat of the tax. I cannot understand why the Government do not realise the difference between forestry and other forms of business, including agriculture. A softwood forest takes up to 75 years to mature and a hardwood forest up to 150 years. Even the people who have been accused of tax evasion do not themselves benefit,


neither do the next generation. The beneficiaries are two or three generations ahead—and at least the country got trees.
As we come to the end of our long debates on this Finance Bill and all the nights and early mornings in Committee, as a new Member of the House there is one memory I shall take away. That is the sheer, utter stubbornness of the Labour Government, their unwillingness to listen to reason and their refusal to consider in one package this tax, the wealth tax and capital gains tax. For doctrinal reasons the Government have pushed the tax through, unamended, without thought. At the beginning of the debate, long before we went Upstairs, I said that this hastily-drawn-up Bill was drafted either by fools or knaves, by morons or Marxists. I have come to the conclusion it is the latter. We are dealing with knaves and Marxists, and that is why the Government have pushed the Bill through against all reason. Once again, I ask the Chief Secretary to take back the Bill and reconsider the capital transfer tax proposals.

Mr. Peter Rees: In rising to intervene briefly in this debate I declare a small personal interest.
The general considerations have been so eloquently deployed by my hon. and right hon. Friends that I shall limit my intervention to a few specific questions with which I hope the Chief Secretary will deal explicitly.
The first is a question which I ventured to address to the Chancellor of the Exchequer in an earlier debate. What consultations, if any, have been held with the Forestry Commission about the basis of capital transfer tax on forestry? If there have been none, why not? If there have been any, what conclusions were reached? What was the advice tendered to the Chancellor of the Exchequer by the Forestry Commissioners?
My other question is of a more technical kind, and it is deployed by Amendment (bbb). It relates to the interaction of income tax and capital transfer tax when the woodlands are cut and sold. Supposing the transferee is to be assessed under Schedule D on the proceeds of cutting, and supposing there is a charge to capital transfer tax carried forward from a past death. A taxpayer might pay more than 100 per cent. when he came to cut. There

may be a simple answer, but 1 cannot find it within the recesses of the schedule. If there is a simple answer I hope that the right hon. Gentleman will give it. If not, I hope that he will treat this as another and cogent reason why this ill-thought-out measure should be withdrawn and reintroduced on another occasion.

Mr. Beith: I hope to draw the attention of the Chief Secretary to a specific question, as other hon. Members have covered the ground so well. I endorse what my hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. Steel) said and pay tribute to the amendments in the name of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley).
I remind the Chief Secretary that the Chancellor received from my constituents, who are forestry workers—not the landowners—three petitions reiterating how deep is their concern. I hope that he will bear this in mind when he blames the disagreement on the views of the landowners alone.
I want particularly to ask the Chief Secretary about the limitation of the schedule to dedicated woodlands. Dedicated woodlands provide only about 37 per cent. of the hardwoods. A large amount of hardwood plantation of considerable environmental importance is outside the area of dedicated woodlands. The reference to dedicated woodlands is probably included because the Opposition stressed strongly that it would be absurd for one Government body to enter into dedication agreements and another Government body to undermine them by taxing dedicated woodlands at a critical rate. Naturally, we welcome the inclusion, but the limitation means that an enormous amount of planting will be seriously threatened. I am thinking especially of small copses of parkland timber and timber planting which would not naturally be the subject of dedication agreements.
A question was asked whether consultations have taken place with the Forestry Commission. Does the commission see the necessity of redefining dedication agreements? If tax concessions are to be based on dedication agreements, the agreements must be extended to cover a far wider range of timber planting, including smaller plantations and scattered planting of environmental value,


trees in parkland, small copses, small shelter belts, and so on. Is the Forestry Commission willing to accept this new approach to dedication schemes? If it is not, such planting will be threatened. Experience to date is that the Forestry Commission, perhaps for good reason, has wanted to confine and limit the operation of dedication agreements to certain kinds of planting. The whole approach to dedication must be revised if it is to be made the sole basis of tax concessions. I shall be grateful for the Chief Secretary's comments on that point, although I hope he will look favourably on a considerable number of amendments.

6.30 p.m.

Mr. Joel Barnett: There are 30 amendments, and I shall do my best to reply to them all in detail. The assumption behind many of the arguments—it is certainly the assumption of the hon. Member for Argyll (Mr. MacCormick), although I do not know whether this is the view held by the Scottish National Party—is that forestry should not be taxed at all. The assumption is that the major reason for planting was that it presented an opportunity for less estate duty to be paid, and without that relief there would be very little new planting.

Sir John Gilmour: I have written to the Chancellor asking for the source of his information that four-fifths of planting was carried out for reasons of tax evasion. He has not yet replied. Everything that the right hon. Gentleman says has been proved false.

Mr. Barnett: I have not yet dealt with that point. I shall be happy to deal with it later. So far, I have made a perfectly innocent remark, and I do not know what the hon. Gentleman is getting excited about. I have said that the assumption behind most of the speeches is that without the old estate duty relief, or something like it, we shall not get the number of trees planted that hon. Members wish.
I turn to the details. First, there is the argument of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) about Amendment (a). This adds to the relief for woodlands relief on the value of the land. Hon. Members have failed to understand the purpose of the schedule,

which is to help growing crops. We recognise this. In certain cases of hardwood there will be four or five generations-130 or, perhaps, 150 years—before the crops mature. We recognise that it would be unfair to tax them at each successive death.
The question of land is entirely different. We have gone a long way in giving the relief we have given, a relief for one special type of asset. To extend that relief much further would be to go too far. I cannot accept the amendment relating to land. The hon. Member for Cirencester and Tewkesbury is obviously getting a little tired as we come to the end of our proceedings, because his example was not as good as the many he gave us in Committee. He cited the case of a man possibly having to chop down his woodland because planning permission had been granted. If that was so the land was worth a substantial sum, and I can see no reason why it should be exempt from capital transfer tax.

Mr. Ridley: The right hon. Gentleman is obviously getting a little tired, because he has just told us that it could take four or five generations to grow mature oaks. He is right, for once. How are the four or five generations to pay four or five swathes of capital transfer tax on the land under which the trees grow? Trees cannot be grown without land.

Mr. Barnett: I am obliged to the hon. Gentleman. I am always glad to learn. It is useful to know how trees grow. I regret to tell him that I can see no reason why capital transfer tax should not be paid on the land, given that the trees have been cut down and the land used for building. If it is agricultural land, forming part of an estate, it gets the relief applicable to agricultural land. I cannot go along with the hon. Gentleman's suggestions.
A major amendment was moved by the hon. Member for Cirencester and Tewkesbury and referred to by the right hon. Member for Down, South (Mr. Powell). The right hon. Member dealt with two issues. The first one he sought to persuade me to accept on logical grounds. He recognised that the second one might not be wholly logical, and he tried to persuade me in order to encourage the planting of woodlands.


I hope to show him that there is no logic in either case.
The right hon. Gentleman said that because we are deferring the point at which capital transfer tax will be charged, it is illogical to tax the woodland at the final point of sale. He said that if a man owns woodlands and dies there will be no capital transfer tax at that point, and therefore it will be taxed at a later date when the woodlands are sold or mature. With respect to the right hon. Gentleman, what he said is somewhat illogical and a little churlish. The assets in question will now go through four or five generations without liability to tax. That is a substantial amount of relief. The right hon. Gentleman suggests that not only should there be no relief at the point of death but that later we should go back to that point and say that it should be taxed at the lowest value. The relief we are giving is quite substantial. It ensures that there will be no need to chop down woodlands because there will be no tax liability through any of these generations to which the hardwoods pass. Only at the point of sale will there be a tax liability. To suggest that we should add to the unfairness against other owners of assets, who have their assets taxed through every generation, by taking the lowest possible value of the woodland and taxing it at that rate is not logical. It is going much too far, and I cannot go along with that amendment.
The next amendment concerns aggregation, a point raised by the right hon. Member for Down, South and the hon. Member for Cirencester and Tewkesbury. Various amendments have been tabled. One tabled by the right hon. Member for Down, South suggested that there should be no aggregation with the estate of the person dying. The amendment tabled by the hon. Member for Antrim, South (Mr. Molyneaux) suggested a mean, or average, rate. The right hon. Gentleman did not seek to persuade me on grounds of logic. He simply sought to persuade me on the ground that his amendment would encourage the planting of trees. We are seeking specifically to do that because we are ensuring that there is no tax liability throughout the whole of the 150 years, if that is what it is, before the trees are chopped. That is quite a substantial relief.
There is no tax liability. [Interruption.]
The hon. and learned Member for Dover and Deal (Mr. Rees) said that he had an interest in these matters. He must recognise that the burden of the case is not to help the small woodland owner who has nothing else—the small woodland owner does not need to have non-aggregation of other assets, since he does not have any. We are talking about the wealthy woodland owner who has other assets as well as his woodland. If they do not have many other assets, there is no problem. This group of amendments is designed essentially to help the wealthy woodland owners. I suggest to the hon. Gentleman that their representations go too far. We have given substantial relief in this schedule and yet they still want more. I am sorry to have to say that they want more not for the small woodlands owner but for the very wealthy.

Mr. MacCormick: Rubbish.

Mr. Barnett: The hon. Member's comment from a sedentary position is about as relevant as his speech was.

Mr. Ridley: The Chief Secretary is not quite right. Even a small and poor woodlands owner has other assets in the form of the land, as I keep telling him. There is no point in his being made to pay on the land. It does not help the exemption for the trees. This non-aggregation amendment is an alternative to the amendment dealing with allowing the land. If we do not aggregate the land and the trees there will be a lower rate on the trees at the time they are sold.

Mr. Barnett: I am sorry to have to tell the hon. Gentleman that he does not seem to be seeing the wood for the trees —or the wood for the land. I dealt with the amendment on land. I shall be happy to go over it again but I thought that the Opposition wanted to make progress. I dealt with that amendment and said that I did not feel able to accept it for reasons that I gave. For the reasons that I have just given I do not feel able to go along with the argument in favour of non-aggregation.
The hon. Member for Cirencester and Tewkesbury and others dealt with Amendment (kk) concerning income tax, capital gains tax and corporation tax. The hon. Member raised some of these


matters in Committee. I said then that he had raised an interesting point, namely, that woodlands should be taxed for income tax and corporation tax. I pointed out that in the main they are not subject to income tax now. Nor are they subject to capital gains tax. I see the hon. and learned Member for Dover and Deal looking at me quizzically. I assure him that no capital gains tax is payable on the sale of woodlands.

Mr. Rees: I appreciate that. I hope that the right hon. Gentleman is coming to the point I made, namely, that it is not true to say that woodlands are not subject to income tax. They may be under Schedule B, although I agree that that is not usually a heavy impost. Since I have declared an interest I will say that I am assessable, with a great many other people, under Schedule D. I would like the right hon. Gentleman to take that into account in replying.

Mr. Barnett: The hon. and learned Member will appreciate that I cannot deal with his personal tax affairs because I do not know anything about anyone's personal income affairs. I can tell him, and he has recognised this, that in the main there is no income tax. Tory Members have naively failed to recognise that in the main not only is there no liability to income tax but woodlands owners are in a very favourable position as regards income tax. During the years before the trees are matured, maintenance costs can be set off against the owner's other income. This is the owner for whom the hon. Member for Buckingham (Mr. Benyon) asked me to provide relief—the owner who has other assets with other income. That other income would be relieved from tax because of the way the income tax system works and because there are no profits, only expenses, and all those expenses are set off against his other income.
There is, therefore, not only no income tax liability on woodlands ; there is a negative income tax, in that there is a set-off against other income. When the trees come to maturity, as the hon. and learned Member for Dover and Deal recognised, in the main they are subject to tax at a tiny level under Schedule B. Amendment (kk) is therefore unnecessary—[Interruption.] Before the hon.

and learned Member has apoplexy, let me assure him that I am coming to his other point.

Mr. John Tomlinson: Do not stop him!

Mr. Barnett: My hon. Friend the Member for Meriden (Mr. Tomlinson) is acting in an uncharacteristic manner. I am sure he would not want me to do the hon. and learned Gentleman any harm.
The other amendment related to interest on moneys invested. Again, I do not feel able to agree that this should be allowed as a set-off for capital transfer tax. This is, first, because there is already a substantial set-off for income tax purposes and, secondly, because, as has been said, when trees are sold, invariably new trees—saplings, seeds or whatever—are planted—in land, I am assured. There are already grants available for such planting, and I do not feel able to go further and give additional tax relief.
6.45 p.m.
The right lion. Member for Down, South spoke about Amendment (t). He thought there might be a little obscurity here. The relief for woodlands is framed so that when the charge to capital transfer tax is made on the proceeds of a sale the charge is made in respect of only the last previous owner's death. Amendment (t) would alter this, so that the tax would be chargeable in respect of each preceding death on which the relief had been given. I am sure that that is not what the right hon. Member intended.

Mr. Powell: As I pointed out, the amendment is for the purpose of clarification. If the right hon. Gentleman is now saying that it all reverts to the last relevant death out of a series of perhaps four generations, what has happened to his argument to the effect that if other amendments we have been discussing were accepted we would be moving right back to the original death, 100 or 120 years ago?

Mr. Barnett: I thought that that was the purport of the other amendments. I hope that I have satisfied the right hon. Gentleman that there is no need for this amendment.
The hon. and learned Member for Dover and Deal referred to Amendment (bbb). If the timber is sold off and income


tax is borne on the net sale proceedings it would in the main be under Schedule B, as we have both recognised. [Interruption.] I am sorry ; we shall have to leave it that I recognise that. It could be a harsh solution to take those proceedings under the capital tax regime. This is the purport of the hon. and learned Gentleman's case. In practice, substantial sales of timber are hardly likely to come fully within the charge to income tax precisely because the assessment will come under Schedule B. That is why the hon. and learned Gentleman, in his peregrinations through the Revenue courts, may not have come across timber cases too often. They never paid any tax.

Mr. Peter Rees: I am infinitely obliged to the Chief Secretary for giving way. Will he address himself to the point put to him. It is very likely—or it is at least possible—that the transferee, when he comes to cut will have to pay tax under Schedule D. It would be easy for me to demonstrate that he may have to pay well over 100 per cent. if, if I understand the right hon. Gentleman correctly, such a person will have to pay capital transfer tax on the net proceedings of the sale and income tax under Schedule D. It is not good enough for the Chief Secretary to slide away from this point by saying that we all know that this person will be assessed under Schedule B. This is not so, unless the right hon. Gentleman can give us the assurance that in every case the transferee will be able to opt for Schedule B just before capital transfer tax comes to be paid. Will he give the House that assurance? If not, will he face the fact that he may well be imposing a charge to capital transfer tax and income tax amounting to well over 100 per cent. in some quite simple cases?

Mr. Barnett: I do not accept those extreme examples. In Standing Committee the hon. and learned Gentleman gave us many examples, all of which were misguided or misplaced. He should know, as indeed should the right hon. Member for Cambridgeshire (Mr. Pym), that in most cases they will be taxed under Schedule B—[Interruption.] I doubt whether anybody would opt to pay income tax under a regime higher than that used in Schedule B.

Mr. Francis Pym: It is an option which an owner can make for

his lifetime. It must apply to all his woodlands. I do not know whether the right hon. Gentleman has comprehended the nature of that option. It may not be possible for such a person to avoid that income tax.

Mr. Barnett: It would be strange for a man to opt to pay income tax at a higher level when he can pay tax under Schedule B at a lower level.
The matter of dedication was mentioned. There was no question of misleading anybody. The most modern dedication scheme was introduced only in October 1974. Therefore, it would be well known to anybody using the scheme that there was to be a capital transfer tax. It was mentioned in March 1974 and there was a White Paper on the subject in July. Therefore, there is no question of any bad faith.
I was asked whether we had had consultations with the Forestry Commission about dedication schemes. I am happy to say that we have had such discussions. The commission was consulted particularly about this feature of the relief—that is to say, that trees planted must come within the dedication scheme. The commission is aware of all these points. 'The new dedication scheme—basis three—goes down as far as woodlands of one hectare in size, or about two and a half acres, and will take in small woods. The new dedication scheme modifies the proposed scheme moving from a preoccupation with timber production to a more broadly-based concept of social benefit. It is possible that there may be some isolated copses or uneconomically-planted woodlands which the Forestry Commission would be unwilling to accept into dedication schemes under the present criteria. I accept that, but in the main it is extremely unlikely that that type of small area would be highly valuable for purposes of CTT.

Mr. Beith: Will the right hon. Gentleman consider the situation in which there is a series of small environmental plantings, all of very much less than two and a half acres?

Mr. Barnett: If there are such small plantings the value is likely to be small, and therefore the CTT is also likely to be small.

Mr. Pym: Did the right hon. Gentleman's consultations with the Forestry Commission take in matters other than dedication? If so, what advice did he have about those other general matters?

Mr. Barnett: I had consultations with the Chairman of the Forestry Commission and many others. As the right hon. Gentleman will know from the advice which he received when in office, it is not the custom—it is certainly not mine—to tell the House or anybody else what that advice is.

Mr. Cormack: Will the right hon. Gentleman say how many consultations he had with representatives of the forestry workers, and also with the Timber Trade Federation?

Mr. Barnett: I thought that the people who came to see me represented not only their capital but the people who worked for them. That was the impression they gave me.
I think I have dealt with the greater part, if not all, of the amendments which have been brought to my attention. There seems to be a wholly false assumption about the whole question of capital transfer tax in relation to forestry and woodlands generally. There is no reason whatever to assume that CTT has been responsible for any drop in planting [HON.
MEMBERS : "Oh."]. If that is the case, it is a most peculiar Opposition argument. They are suggesting that the major reason for planting trees is to be able to escape estate duty.

Mr. Cormack: The Chief Secretary has made a ridiculous statement. The fact that there was so much uncertainty when the Government's scheme was first mooted is obvious, since they did not plant trees to the tune of some 30 million.

Mr. Barnett: That is precisely what I said—namely, that the Opposition appear to be arguing that the reason why owners did not plant trees was that they were no longer able to obtain estate duty relief [An HON. MEMBER : "What about the profit?"] I do not know how that affects their profit. We are talking about estate duty. Nobody is talking about profitability ; we are talking about the tax. The argument has been that only because of the existence of estate duty relief were

trees planted—[HON. MEMBERS : "No.") What on earth are the Opposition talking about then? What is the burden of their case? The profitability has not changed. The profitability is the same before and after CTT. The schedule which I have presented to the House gives substantial relief to a specific and important asset—namely woodlands. The amount of relief given passes over a number of generations. It is very generous to a particular asset, as opposed to many other assets which, equally, have a small economic return.
I hope that the Opposition will examine what they are suggesting. They are suggesting that we should give further relief not so much to small woodland owners but to the very wealthy woodland owners who will already be given substantial relief by the provisions of the schedule. I think they are asking me to go very much further now, and I must ask my right hon. and hon. Friends to resist any amendment to the schedule.

Mr. Hector Monro: Before he sits down, will the right hon. Gentleman deal with two points which many of us have raised on innumerable occasions? [HON. MEMBERS : "He has already sat down."] First, what is the position regarding unemployment in forestry in the future, and, secondly, what is the situation in regard to imports in the years ahead?

Mr. Nott: I congratulate my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) on a clear, concise and moderate introduction of these amendments, despite the fact that the names of his hon. Friends appear to have been taken off the Amendment Paper inadvertently. The manner in which he opened the debate was evidence of the fact that we can get along perfectly well with just my hon. Friend's name against these important amendments.
Many protests have been made about the rushed nature of these complicated matters. We are not aware of any substantive consultations which have taken place between the Treasury and forestry interests between the end of the Committee stage and Report. It may well be that the right hon. Gentleman the Chief Secretary has had one meeting with outsiders, but we are not aware that consultations have taken place.


Since the whole basis on which forestry is to be taxed under the CTT has been changed between Committee and Report stages, it would have been desirable if there had been much fuller consultation.
I have a telegram which was sent by the Vice-Chairman of the Forestry Committee of Great Britain to the Chancellor of the Exchequer, emphasising the regrettable lack of consultation and unnecessary haste. The Government fail to understand that forestry is a long-term industry and deserves long-term and mature consideration. We do not believe the new clause has received that full and proper consideration which it deserves.
We do not expect Treasury Ministers to have a detailed knowledge of every single specific industry and in dealing with woodlands we are embarking upon a technical area of the tax law. I hesitate to intervene between such experts as the Chief Secretary and my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) but in a moment I should like to refer to the option available between Schedule B and Schedule D, because I think it is important.
7.0 p.m.
The debate has fallen into several categories. We must deal first with the amendment which seeks to place the valuation on the same date basis as the rate of tax. The right hon. Member for Down, South (Mr. Powell) referred to the matter at some length. The amendment was mentioned as one of our two major amendments by my hon. Friend the Member for Cirencester and Tewkesbury. The Chief Secretary said that it was illogical for the right hon. Gentleman to say that death should be taken as the point for the rate and valuation because the Government had already given substantial concessions. He went on to say that the request was churlish. This shows a total lack of understanding on the part of the Chief Secretary of the fact that we are dealing with a particular and special industry which, throughout the whole of our estate duty legislation, had been recognised as such.
What may well happen now is that the trees will be felled before maturity. Under the legislation before us it is possible to conceive tax being payable on rates of capital transfer tax which

were prevailing 100 years earlier. I do not believe that it is logical to put on the statute book a system which could lead to somebody paying a rate of tax when he sells, say, an oak tree, which had been settled 100 years before the sale.
The Chief Secretary said that the right hon. Gentleman was churlish in suggesting that there was something illogical about this. I see nothing illogical about it at all. Indeed, the illogicality lies in the new proposal which the Chief Secretary is bringing forward.

Mr. Powell: The Chief Secretary kicked the bottom out of that argument by pointing out that the words in paragraph 2 caused paragraph 3 to refer to the latest and not the earliest of a series of deaths and successions.

Mr. Nott: The right hon. Gentleman also referred to that, and I shall come back to it later.
The next most important amendment concerns the levying of capital transfer tax on the top slice. There is a feeling among the Chancellor's advisers—I am sure they have not changed their view since I was at the Treasury—that forestry and woodlands are a potent source of avoidance and are therefore to be deplored. I remember very well that when we were in office we had cause to look at the basis upon which woodlands were treated. I can remember very well the recommendations that were put forward to us. It is the task of Treasury Ministers to examine advice with great care. We cannot put a great industry like this in jeopardy because there is a feeling on the part of advisers, and it appears, on the part of the Chancellor of the Exchequer, that this whole area is motivated wholly by tax avoidance. That is simply not the case. To tax on the top slice is harsh and unfair.
My hon. Friend the Member for Cirencester and Tewkesbury talked about the value of the land being exempt from the provisions of the schedeule. The Chief Secretary's reply was "We brought this new schedule forward because we were concerned that this was a case where we were dealing with growing crops ". I think that those were his words. We are not dealing, however, with a field of wheat ; we are dealing with a crop which may take 100 years or more to mature. When my hon. Friend asked that the


value of land should be included, he was absolutely right. How can it be sensible for the land upon which the trees are growing to bear four or five bites of capital transfer tax when the trees themselves are to exempted until they are sold? Surely this cannot be logical.
I should like to give a personal example. I must here declare an interest. I have a farm of my own, on which I have been planting shelter belts. Since these are shelter belts for horticulture, I hope that the value of the land is not less than £500 an acre. It may be worth £1,000 an acre. I have planted 5,000 trees, and the planting was finished a few days ago. Although these trees may pass through five generations without capital transfer tax being payable, is it intended, or is it logical or sensible, that the land upon which they are growing, which may well have a value of up to £10,000 an acre, for all I know, in 100 years' time, to have to bear repeated slices of capital transfer tax through the generations, although the trees do not? The Chief Secretary has not answered that point.

Mr. Joel Barnett: I hope that the hon. Gentleman has taken the point that the agricultural value of the land for capital transfer tax purposes will be the multiple of the rental value, which will be considerably lower than the figure he has given.

Mr. Nott: I am well aware that the valuation of agricultural land is on a multiplier basis rather than a market value basis, but I cannot possibly say what the margin between a multiplier of the agricultural rents and agricultural value will be in a generation's time. It may well be that the concessions which the Government have made may not be valuable at all in a generation's time. I hope that it will be, but it may not be. [Interruption.] I agree that the margin is narrowing all the time.
I turn to the question of the dedication scheme. The Chief Secretary said that he had consulted the Forestry Commission on the widening of the dedication scheme arrangements. The matter is extremely important, because as the schedule stands the scheme does not include a great deal of our woodland.
There was a dispute between my hon. and learned Friend the Member for Dover and Deal and the Chief Secretary about Schedule B and Schedule D. I find it difficult to believe that the majority of people who own small woodlands and who are therefore not in business as major woodland owners, will opt for taxation under Schedule B. I should have thought that the majority of people who own small amounts of woodland will pay tax under Schedule D. The Chief Secretary implied that the whole thing was a racket, because people who might be paying tax under Schedule D could offset their maintenance expenses and other expenses against tax throughout the period. He suggested that they were in some way having a double benefit. How can that be the case? If they are under Schedule D, they are merely offsetting allowable expenses against other income in the way allowed throughout the Schedule D arrangements. There is nothing different here from the normal taxation arrangements.
The point made by my hon. Friend the Member for Cirencester and Tewkesbury about thinnings—known in some quarters as "underwood "—is also valid. When somebody inherits woodland, no capital transfer tax is paid. Is it the case that each year, as the thinnings are sent away to a pulp mill, capital transfer tax will arise when those thinnings are sold?
My hon. Friend was absolutely right. It is nonsense if capital transfer tax, which is meant to be a capital tax, works as a revenue tax. It appears that, at great inconvenience and trouble to the accountants and others concerned, there would be a liability to the tax year by year as the thinnings or the underwood were sold to the pulp mills.

Mr. Joel Barnett: The logic of what the hon. Gentleman is saying is that as thinning goes on throughout the period, year after year, there will never be any capital transfer tax. Is that what the hon. Gentleman is saying?

Mr. Nott: I am saying that if a person inherited woodlands, and the capital transfer tax was not then payable, as he sold the thinnings year by year a piece of capital transfer tax would be payable each year.

Mr. Joel Barnett: What is the alternative?

Mr. Nott: My hon. Friend was making the point that an administrative burden of a revenue tax nature was then placed upon the woodland's owner, when we are dealing here with a capital transfer tax, which is presumably not meant to apply to individuals annually.
I must protest that although we have had this debate attended by my hon. Friends the Members for Aberdeenshire, West (Mr. Fairgrieve), North Angus and Mearns (Mr. Buchanan-Smith), Fife, East (Sir J. Gilmour) and the hon. Members for Roxburgh, Selkirk and Peebles (Mr. Steel) and Argyll (Mr. McCormick), there has been nobody here from the Scottish Office. As far as I am aware, nobody from the Scottish Office was here for the recent debate. The forestry industry is a major industry in Scotland, and Ministers from the Scottish Office should have been here to listen to the debate.
What is more, as far as I am aware no representative from the Ministry of Agriculture has been here. It would have been right and proper for Ministers from that Ministry to be present. The reason for their absence must be that they are embarrassed by the Treasury's measure.
The Chief Secretary suggested that we were claiming that if it were not for avoidance we should have no woodlands. In fact, the estate duty arrangements which have long existed for woodlands were placed on the statute book because our forebears knew that it was a particular industry needing particular measures for its encouragement.
It is monstrous for the Chief Secretary to say that the shortfall in planting this year, which I understand to be about 30 million trees, is not attributable to the tax, when the representatives of the Forestry Commission of Great Britain and all those concerned with the industry say specifically that the plantings have not taken place because of the muddle over the tax and the manner in which the original proposals were brought forward.

in the Bill. If the right hon. Gentleman says that the total uncertainty that has prevailed is not the cause of the shortfall, he must think not only that my hon. Friends are fools but that all those who plant woodlands and everybody who advises them are fools as well.

We seem to start from a different position from the Government in all these debates. The Opposition want to see our woodlands and rural employment preserved, whereas the Chief Secretary seems obsessed with removing any possibility of what he described as avoidance of capital transfer tax and any kind of special concession for special industries.

In Scotland, one in six of the rural workers is engaged in forestry. More than half the rural workers in the private sector are engaged in the industry. They are greatly concerned about the way in which the whole business has been handled by the Government.

When we saw in today's newspapers a picture of the Prime Minister planting a tree, we were ashamed to think that the Government should introduce this ill-thought-out measure. My hon. Friend said that we did not want any crumbs of comfort. We have had none. I hope that before the next Budget the Chief Secretary will have time to consult the woodland interests, look into the matter in greater depth, obtain a greater knowledge of the great industry, and introduce proper amendments to his original proposals.

Question put and agreed to.

Schedule read a Second time.

Amendment proposed to the proposed schedule : (ii) in line 42, leave out ' highest ' and insert ' mean '.—[Mr. Powell.]

Question put, That the amendment be made to the proposed schedule:

The House divided : Ayes 255, Noes 272.

Division No. 135]
AYES
[7.14 p.m.


Adley, Robert
Bennett, Sir Frederic (Torbay)
Brittan, Leon


Aitken, Jonathan
Bennett, Dr Reginald (Fareham)
Brotherton, Michael


Alison, Michael
Benyon, W.
Brown, Sir Edward (Bath)


Arnold, Tom
Berry, Hon Anthony
Buchanan-Smith, Alick


Atkins, nt Hon H. (Spelthorne)
Bitten, John
Buck, Antony


Awdry, Daniel
Biggs-Davison, John
Budgen, Nick


Bain, Mrs Margaret
Blaker, Peter
Bulmer, Esmond


Baker, Kenneth
Boscawen, Hon. Robert
Burden, F. A.


Banks, Robert
Bowden, A. (Brighton, Kemptown)
Butler, Adam (Bosworth)


Beith, A. J.
Boyson, Dr. Rhodes (Brent)
Carlisle, Mark


Bell, Ronald
Bradford, Rev Robert
Carson, John




Chalker, Mrs Lynda
Howell, David (Guildford)
Powell, Rt Hon J. Enoch


Channon, Paul
Howells, Geraint (Cardigan)
Prior, Rt Hon James


Churchill, W. S.
Hurd, Douglas
Pym, Rt Hon Francis


Clark, Alan (Plymouth, Sutton)
Hutchison, Michael Clark
Raison, Timothy


Clark, William (Croydon S)
Irving, Charles (Cheltenham)
Rathbone, Tim


Clarke, Kenneth (Rushcliffe)
James, David
Rawlinson, Rt Hon Sir Peter


Clegg, Walter
Jenkin,Rt Hon P.(Wanst'd &amp; W'df'd)
Rees, Peter (Dover &amp; Deal)


Cockcroft, John
Jessel, Toby
Rees-Davies, W. R.


Cooke, Robert (Bristol W)
Johnson Smith, G. (E. Grinstead)
Reid, George


Cope, John
Jones, Arthur (Daventry)
Renton, Rt Hon Sir D. (Hunts)


Cormack, Patrick
Joseph, Rt Hon Sir Keith
Renton, Tim (Mid-Sussex)


Costain, A. P.
Kershaw, Anthony
Ridley, Hon Nicholas


Craig, Rt Hon W. (Belfast E)
Kilfedder, James
Ridsdale, Julian


Crawford, Douglas
Kimball, Marcus
Rifkind, Malcolm


Critchley, Julian
King, Evelyn (South Dorset)
Roberts, Michael (Cardiff NW)


Davies, Rt Hon J. (Knutsford)
King, Tom (Bridgwater)
Roberts, Wyn (Conway)


Dean, Paul (N Somerset)
Knight, Mrs Jill
Ross, Stephen (Isle of Wight)


Dodsworth, Geoffrey
Knox, David
Ross, William (Londonderry)


Douglas-Hamilton, Lord James
Lamont, Norman
Rost, Peter (SE Derbyshire)


du Cann, Rt Hon Edward
Lane, David
Sainsbury, Tim


Durant, Tony
Langford-Holt, Sir John
St. John-Stevas, Norman


Eden, Rt Hon Sir John
Latham, Michael (Melton)
Shaw, Giles (Pudsey)


Edwards, Nicholas (Pembroke)
Lawrence, Ivan
Shelton. William (Streatham)


Elliott, Sir William
Lawson, Nigel
Shepherd, Colin


Emery, Peter
Lester, Jim (Beeston)
Shersby, Michael


Evans, Gwynfor (Carmarthen)
Lewis, Kenneth (Rutland)
Silvester, Fred


Ewing, Mrs Winifred (Moray)
Lloyd, Ian
Sims, Roger


Eyre Reginald
Leveridge. John
Sinclair, Sir George


Fairbairn. Nicholas
Luce, Richard
Skeet, T. H. H.


Fairgrieve, Russell
MacCormick, Iain
Smith, Cyril (Rochdale)


Farr, John
McCrindle, Robert
Smith, Dudley (Warwick)


Fell. Anthony
McCusker, H.
Speed, Keith


Finsberg, Geoffrey
Macfarlane, Neil
Spence, John


Fisher, Sir Nigel
MacGregor, John
Spicer, Michael (S Worcester)


Fletcher, Alex (Edinburgh N)
Macmillan, Rt Hon M. (Farnham)
Sproat, Iain


Fletcher-Cooke, Charles
McNair-Wilson, M. (Newbury)
Stainton, Keith


Fookes, Miss Janet
McNair-Wilson, P. (New Forest)
Stanbrook. Ivor


Fowler, Norman (Sutton C'f'd)
Madel, David
Stanley, John


Fox, Marcus
Marshall, Michael (Arundel)
Steel, David (Roxburgh)


Fraser,Rt Hon H.(Stafford &amp; St)
Marten, Neil
Steen, Anthony (Wavertree)


Freud, Clement
Mates, Michael
Stewart, Donald (Western Isles)


Fry, Peter
Mather, Carol
Stewart, Ian (Hitchin)


Galbraith Hon. T. G. D.
Maude, Angus
Stokes, John


Gardiner, George (Reigate)
Maudling, Rt Hon Reginald
Stradling Thomas, J.


Gardner, Edward (S Fylde)
Mawby, Ray
Tapsell. Peter


Gilmour, Rt Hon Ian (Chesham)
Maxwell-Hyslop, Robin
Taylor, Teddy (Cathcart)


Gilmour, Sir John (East Fife)
Mayhew, Patrick
Tebbit, Norman


Glyn, Dr Alan
Meyer, Sir Anthony
Temple-Morris, Peter


Goodhart Philip
Miller, Hal (Bromsgrove)
Thomas, Dafydd (Merioneth)


Goodhew, Victor
Mills, Peter
Thompson, George


Goodlad, Alastair
Miscampbell, Norman
Townsend, Cyril D.


Gorst, John
Mitchell, David (Basingstoke)
Trotter, Neville


Gow, Ian (Eastbourne)
Moate, Roger
van Straubenzee, W. R.


Gower, Sir Raymond (Barry)
Monro, Hector
Vaughan, Dr. Gerard


Grant, Anthony (Harrow C)
Montgomery, Fergus
Viggers, Peter


Gray, Hamish
Moore John (Croydon C)
Wainwright Richard (Colne V)


Grieve, Percy
More, Jasper (Ludlow)
Wakeham John


Griffiths, Eldon
Morgan-Giles, Rear-Admiral
Walters Dennis


Grimond, Rt Hon J.
Morris, Michael (Northampton S)
Warren, Kenneth


Grist, Ian
Morrison, Charles (Devizes)
Watt, Hamish


Grylls,. Michael
Morrison, Hon Peter (Chester)
Weatherill, Bernard


Hall, Sir John
Neave, Airey
Wells, John


Hall-Davis, A. G. F.
Nelson, Anthony
Welsh, Andrew


Hampson, Dr Keith
Neubert, Michael
Whitelaw, Rt Hon William


Hannam, John
Newton, Tony
Wiggin, Jerry


Harrison, Col Sir Harwood (Eye)
Nott, John
Wigley, Dafydd


Hastings, Stephen
Onslow, Cranley
Wilson, Gordon (Dundee E)


Havers, Sir Michael
Oppenheim, Mrs Sally
Winterton, Nicholas


Hawkins, Paul
Page, John (Harrow West)
Wood, Rt Hon Richard


Henderson, Douglas
Page, Rt Hon R. Graham (Crosby)
Young, Sir G. (Ealing, Acton)


Heseltine, Michael
Pardoe, John



Hicks, Robert
Parkinson, Cecil
TELLERS FOR THE AYES:


Higgins, Terence L.
Penhaligon, David



Holland, Philip
Percival, Ian
Mr. Spencer Le Marchant an


Hordern, Peter
Peyton, Rt Hon John
Mr. James Molyneaux.


Howe, Rt Hn Sir Geoffrey
Pink, R. Bonner





NOES


Abse, Leo
Ashton, Joe
Barnett, Rt Hon Joel (Heywood)


Allaun, Frank
Atkins, Ronald (Preston N)
Bates, Alf


Anderson, Donald
Atkinson, Norman
Bean, R. E.


Archer, Peter
Bagier, Gordon A. T.
Benn, Rt Hon Anthony Wedgwood


Ashley, Jack
Barnett, Guy (Greenwich)
Bennett, Andrew (Stockport N)







Bidwell, Sydney
Gourlay, Harry
Noble, Mike


Bishop, E. S.
Graham, Ted
Oakes, Gordon


Blenkinsop, Arthur
Grant, George (Morpeth)
Ogden, Eric


Boardman, H.
Hamilton, James (Bothwell)
O'Halloran, Michael


Booth, Albert
Hamilton, W. W. (Central Fife)
O'Malley, Rt Hon Brian


Boothroyd, Miss Betty
Hardy, Peter
Orbach, Maurice


Bottomley, Rt Hon Arthur
Harper, Joseph
Ovenden, John


Boyden, James (Bish Auck)
Harrison, Walter (Wakefield)
Padley, Walter


Bradley, Tom
Hattersley, Rt Hon Roy
Palmer, Arthur


Bray, Dr Jeremy
Hatton, Frank
Park, George


Brown, Hugh D. (Provan)
Healey, Rt Hon Denis
Parker, John


Brown, Robert C. (Newcastle W)
Hooley, Frank
Parry, Robert


Brown, Ronald (Hackney S)
Horam, John
Pendry, Tom


Buchan, Norman
Howell, Denis (B'ham, Sm H)
Perry, Ernest


Buchanan, Richard
Hoyle, Doug (Nelson)
Phipps, Dr Colin


Butler, Mrs Joyce (Wood Green)
Huckfield, Les
Prentice, Rt Hon Reg


Callaghan, Jim (Middleton &amp; P)
Hughes, Rt Hon C. (Anglesey)
Prescott, John


Campbell, Ian
Hughes, Mark (Durham)
Price, William (Rugby)


Canavan, Dennis
Hughes, Robert (Aberdeen N)
Radice, Giles


Cant, R. B.
Hughes, Roy (Newport)
Richardson, Miss Jo


Carmichael, Neil
Hunter, Adam
Roberts, Albert (Normanton)


Carter, Ray
Irving, Rt Hon S. (Dartford)
Roberts, Gwilym (Cannock)


Carter-Jones, Lewis
Jackson, Colin (Brighouse)
Robertson, John (Paisley)


Cartwright, John
Jackson, Miss Margaret (Lincoln)
Roderick, Caerwyn


Castle, Rt Hon Barbara
Jay, Rt Hon Douglas
Rodgers, George (Chorley)


Clemitson, Ivor
Jeger, Mrs Lena
Rooker, J. W.


Cocks, Michael (Bristol S)
Jenkins, Hugh (Putney)
Roper, John


Cohen, Stanley
Johnson, James (Hull West)
Rose, Paul B.


Colquhoun, Mrs Maureen
Johnson, Walter (Derby S)
Ross, Rt Hon W. (Kilmarnock)


Concannon, J. D.
Jones, Alec (Rhondda)
Rowlands, Ted


Conlan, Bernard
Jones, Barry (East Flint )
Ryman, John


Cook, Robin F. (Edin C)
Jones, Dan (Burnley)
Sandelson, Neville


Corbett, Robin
Judd, Frank
Sedgemore, Brian


Cox, Thomas (Tooting)
Kaufman, Gerald
Selby, Harry


Craigen, J. M. (Maryhill)
Kelley, Richard
Shaw, Arnold (Ilford South)


Cronin, John
Kerr, Russell
Sheldon, Robert (Ashton-u-Lyne)


Cryer, Bob
Kilroy-Silk, Robert
Shore, Rt Hon Peter


Cunningham, G. (Islington S)
Kinnock, Neil
Short, Rt Hon E. (Newcastle C)


Cunningham, Dr J. (Whiteh)
Lamble, David
Short, Mrs Renée (Wolv NE)


Dalyell, Tarn
Lamborn, Harry
Silkin, Rt Hon John (Deptford)


Davidson, Arthur
Lamond, James
Silkin, Rt Hon S. C. (Dulwich)


Davies, Bryan (Enfield N)
Latham, Arthur (Paddington)
Sillars, James


Davies, Denzil (Llanelli)
Leadbitter, Ted
Silverman, Julius


Davies, Ifor (Gower)
Lee, John
Skinner, Dennis


Davis, Clinton (Hackney C)
Lewis, Arthur (Newham N)
Small, William


Deakins, Eric
Lewis, Ron (Carlisle)
Smith, John (N Lanarkshire)


Dean, Joseph (Leeds West)
Lipton, Marcus
Snape, Peter


de Freitas, Rt Hon Sir Geoffrey
Litterick. Tom
Spearing, Leslie


Delargy, Hugh
Lomas, Kenneth
Spriggs, Leslie


Dell, Rt Hon Edmund
Loyden, Eddie
Stallard A. W.


Dempsey, James
Luard, Evan



Doig, Peter
Lyon, Alexander (York)
Stewart, Rt Hon M. (Fulham)


Dormand, J. D.
Lyons, Edward (Bradford W)
Stoddart, David


Douglas-Mann, Bruce
Mabon, Dr J. Dickson
Stott, Roger


Duffy, A. E. P.
McCartney, Hugh
Strang, Gavin


Dunn, James A.
McElhone, Frank
Strauss, Rt Hon G. R.


Dunnett, Jack
MacFarquhar, Roderick
Summerskill, Hon Dr. Shirley


Dunwoody, Mrs Gwyneth
McGuire, Michael (Ince)
Taylor, Mrs Ann (Bolton W)


Eadie, Alex
Mackenzie, Gregor
Thomas, Mike (Newcastle E)


Edelman, Maurice
Mackintosh, John P.
Thomas, Ron (Bristol NW)


Edge, Geoff
Maclennan, Robert
Thorne, Stan (Preston South)


Ellis, John (Briggg &amp; Scun)
McMillan, Tom (Glasgow C)
Tierney, Sydney


Ellis, Tom (Wrexham)
McNamara, Kevin
Tinn, James


English, Michael
Madden, Max
Tomlinson, John


Ennals, David
Mahon, Simon
Tomney, Frank


Evans, John (Newton)
Marks, Kenneth
Torney, Tom


Ewing, Harry (Stirling)
Marquand, David
Urwin, T. W.


Faulds, Andrew
Marshall, Dr Edmund (Goole)
Varley, Rt Hon Eric G.


Fernyhough, Rt Hon E.
Marshall, Jim (Leicester S)
Wainwright, Edwin (Dearne V)


Flannery, Martin
Mason,Rt Hon Roy
Walden, Brian (B'ham, L'dyw'd)


Fletcher, Raymond (Ilkeston)
Meacher, Michael
Walker, Harold (Doncaster)


Fletcher Ted (Darlington)
Mellish, Rt Hon Robert
Walker, Terry (Kingswood)


Foot, Rt Hon Michael
Millen, Bruce
Ward, Michael


Ford, Ben
Miller, Dr M. S. (E Kilbride)
Watkins, David


Forrester, John
Miller, Mrs Millie (Ilford N)
Watkinson, John


Fowler, Gerald (The Wrekin)
Mitchell, R. C. (Soton, Itchen)
Weetch, Ken


Fraser, John (Lambeth, N'w'd)
Molloy, William
Wellbeloved, James


Freeson, Reginald
Moonman, Eric
White, Frank R. (Bury)


Garrett, John (Norwich S)
Morris, Alfred (Wythenshawe)
White, James (Pollok)


Garrett, W. E. (Wallsend)
Morris, Charles R. (Openshaw)
Whitlock, William


George, Bruce
Morris, Rt Hon J. (Aberavon)
Willey, Rt Hon Frederick


Gilbert, Dr John
Mulley, Rt Hon Frederick
Williams, Alan (Swansea W)


Ginsburg, David
Murray, Rt Hon Ronald King
Williams, Alan Lee (Hornch'ch)


Golding, John
Newens, Stanley
Williams, W. T. (Warrington)







Wilson, Alexander (Hamilton)
Woodall, Alec
TELLERS FOR THE NOSE


Wilson, William (Coventry SE)
Wrigglesworth, Ian



Wise, Mrs Aurdey
Young, David (Bolton E)
Mr.Donald Coleman and




Mr.Laurie Pavitt.

Question accordingly negatived.

Schedule added to the Bill.

Schedule 4

ADMINISTRATION AND COLLECTION CAPITAL OF TRANSFER TAX

Amendments made: No. 135, in page 55, line 37, leave out 25th ' and insert 26th '.

No. 137, in page 56, line 44, after 32', insert :
`or (conditional exemption for certain buildings, etc. on death) '.

No. 138, in page 56, line 44, after Act ', insert :
' or under paragraph 2 of Schedule (Relief for woodlands) to this Act '.

No. 494, in page 56, line 46, leave out three ' and insert six'.—[Mr. Joel Barnett.]

Sir Geoffrey Howe: I beg to move Amendment No. 697, in page 57, leave out lines 9 to 27 and insert :
4.—(1) Where a settlement is made after 26th March 1974 by a settlor who was at the time domiciled in the United Kingdom and the trustees of the settlement arc not resident in the United Kingdom the settlor shall within three months of the making of the settlement or, if it was made before the passing of this Act, within three months of the passing of this Act, send a copy of the settlement to the Board and give the Board such particulars thereof as the Board may require for the purposes of this Part of this Act.
(2) Where the trustees of a settlement made by a person domiciled in the United Kingdom at the time the settlement was made become not resident in the United Kingdom the settlor shall make a return to the Board within the time specified in subparagraph (1) above as if references therein to the making of the settlement were to the trustees becoming not resident in the United Kingdom.
(3) If the settlor fails to comply with subparagraphs (1) or (2) above within the times therein stated or such long period as the Board shall allow, the settlement shall be void.
(4) This paragraph shall not apply to the creation of any resulting, implied or constructive trusts or to the creation of any settlement by will.
(5) Paragraph 12(5) of Schedule 5 to this Act applies for the purposes of this paragraph '.

Mr. Speaker: With this it may be convenient to discuss the following amendments : No. 690, in page 57, line 9, after

person ' insert other than an individual '.

No. 686, in page 57, line 10, after 'trade',insert:
'Other than the trade of banking'.

No. 434, in page 61, leave out lines 1 to 9.

No. 139, in page 57, leave out lines 9 to 27.

Sir G. Howe: Amendments Nos. 697 and 139 are directed to removing from the Bill or modifying the unnecessary and unjustifiable invasion of the privacy that exists between a taxpayer and his professional advisers. They are directed towards the section of the Bill that is becoming known as the "noopers' charter ". It is an area in which we believe the Government have made grave and unnecessary errors from the point of view of the collection of the tax, and damaging errors as regards the citizen and civil liberties. It is yet another instance where it is necessary to draw attention to the volume of protest outside the House at the way in which this legislation has been handled.
In case the Chief Secretary has not observed it already, I draw his attention to the powerful criticism uttered on Saturday by the President of the Institute of Chartered Accountants whilst speaking in Sheffield. He said that the use of the guillotine on the last stages of this Finance Bill amounted to
 the crassest folly for which the public generally, and the accountancy and legal professions, and the Inland Revenue in particular, will suffer endless hours of unproductive worry and argumentation to no beneficial end and significant waste of valuable human effort.
He concluded with the warning that I echo ; namely :
 the only effect of the present absurdities is to ensure the continued decline in respect for both Parliament and the law.
Nowhere is the Government's determination to reduce respect for the law more evident than in the provisions of Schedule 4, paragraphs 4 and 11, which are the subject of the two amendments with which I am principally concerned at this stage. Paragraph 11, which is the subject of Amendment No. 434, gives


the Board of the Inland Revenue wide-ranging powers to inspect any property under very wide circumstances on terms that we regard as unjustifiable. Our amendment is to leave out paragraph 11.
7.30 p.m.
The worst wickedness arises in paragraph 4 and in the disingenuous, misleading way in which in our discussion in Committee the Chief Secretary sought to justify the provisions of the paragraph. It introduces a new principle whereby those concerned with advising a taxpayer are required, without any prior notice, from the Revenue authorities to make returns to the board, unprompted and uninvited, in relation to what their clients have been doing.
The Chief Secretary suggested that precedents were to be found in the Income and Corporation Taxes Act 1970, and he referred to Section 481(3). However, that is not the case. It is true that the Inland Revenue has powers under Sections 443 and 453 of the 1970 Statute to require information from the parties to a settlement on written notice from an inspector. That is a great deal less extensive than the provisions in paragraph 4 of Schedule 4. Paragraph 4 provides for automatic notification not just by transferors but by their representatives and advisers as well.
It is also true that Section 481(3) of the 1970 Act, wrongly cited as a precedent. enables the Commissioners to require by written notice information of a specified kind. But that again is no precedent for what is required here.
The vice here is the provision whereby all advisers other than barristers are required to furnish names and addresses of settlors and trustees not merely in relation to any settlement which takes place under specified circumstances but where they have been concerned with its making—retrospectively, incidentally—and have reason to believe that certain circumstances arise.
I see no reason why barristers should be excluded, unless it be because of a sense of guilt which has pervaded even the Chief Secretary's narrow mind and because he realises that it is unjustifiable in relation to other professional advisers.
This is to impose far too wide a burden for which there can be no justification. It has been criticised bitterly by the pro-

fessional institutions—by the Law Society and the Institute of Chartered Accountants—and no significant justification for it has been brought forward.
The author of the leading article in the New Law Journal of 27th February this year described this as "yet another damaging precedent." He set out clearly why it is wrong to allow the Revenue to advance in this respect still further the frontier of intrusiveness in relation to the taxpayer, and he pointed out :
…it is the nature of a precedent that it diminishes the onus of proving that the course of conduct proposed is justifiable, at least to the extent that that course of conduct has apparent features in common with the course of conduct sanctioned by the precedent itself.
He therefore regards it as a dangerous departure from previous practice.
The case was made even more powerfully in The Times on 10th February, and I adopt these words without qualification :
 This would be a major attack on the professional obligations of secrecy about a client's affairs. It may be argued that, since it will be an offence for someone domiciied in this country to make such a settlement without notifying it to the authorities, these provisions …do no more than place a further obligation on `accessories after the fact' to inform those in authority.
The Times acknowledges :
 There is some force in this argument, but it must be balanced against the damage that would be done to the relations between a professional adviser and his clients.
Let us examine how little force there is in the argument by looking at two previous pieces of legislation, both passed, not surprisingly, under Socialist administrations. The first is the Exchange Control Act 1947, about which Hugh Dalton wrote eulogistically in his autobiography. I recall that it has an unattractive legislative progeny. It was founded on emergency regulations passed under the 1939 emergency legislation. It imposed a tyrannous control on the transfer of funds outside this country, and it is to be regretted that it has been allowed to remain unamended on the statute book. But even that legislation contained in paragraph 1(3) of the Fifth Schedule:
 Nothing in the preceding provisions of this paragraph shall be taken to require any person who has acted as counsel or solicitor for any person to disclose any privileged communication made to him in that capacity.
That is right. The normal rules against disclosure exclude professional advisers


from the concept of accessories after or before the fact. If they did not, how could a professional adviser carry out his duties to his client?
More recent, more pervasive and more extensive in its obligations is a statutory instrument passed in 1968 in relation to sanctions on exports to Rhodesia. It is Statutory Instrument No. 1020 of 1968, the Southern Rhodesia (United Nations Sanctions) (No. 2) Order. That imposes very wide prohibitions on the exportation of goods from the United Kingdom to Rhodesia and on their importation. It gives massive and extensive powers of entry, powers of search, very wide liabilities on any people connected with the making of such transactions. But even in that, when we come to Schedule 1 (Evidence and Information), we find the hallowed provision :
 Nothing in the foregoing subparagraph shall be taken to require any person who has acted as counsel or solicitor for any person to disclose any privileged communication made to him in that capacity.
The long tradition of the British legal system has been that whatever the extent of the obligations imposed on citizens, successive Governments have striven to preserve that privilege. It is because of the casual way in which this Government sweep that aside in relation to this tax that I move this amendment.

Mrs. Winifred Ewing: Will the right hon. and learned Gentleman agree that it is very strange to be a member of the legal profession—in my case, the solicitor branch—and to find that the long-standing tradition of confidentiality will be partly thrown to the wind in certain respects? Is he aware that I support him on this matter?

Sir G. Howe: I am grateful for the hon. Lady's support. I feel almost guilty, however, because of the special exemption made in favour of the Bar. I can see no justification for any discrimination between her and me.
It is easy for Treasury Ministers and those who advise them to be persuaded "Here is a potential loophole and an area where we should take wide ranging powers. Let us stop it up in advance." But they should not take that action in that way to create a precedent which is without justification. It may be that some revenue will pass through the net because

of this, but that would be a small price to pay for preserving the principle to which the hon. Member for Moray and Nairn (Mrs. Ewing) has drawn attention.
Amendment No. 697 asserts a respectable, practicable and workable principle that the obligation of notification shall be placed on the settlor, and we suggest it by way of substitution for paragraph 4. If the Chief Secretary asserted that there was some defect in our draftsmanship, I should regard that as a slender and irrelevant excuse. Our intention is clear. and he should accept it. However, we would support as an alternative the Liberal amendment which seeks to delete the offending paragraph altogether.
Balancing the importance of preserving professional privilege in this respect and the importance of not creating a very dangerous new precedent—an obligation upon professional advisers to notify over a wide, ill-defined area without notice and without requirement from the Inland Revenue—against the marginal advantage to the Revenue of including this paragraph, I hope the Chief Secretary will accept the amendment in one form or another.
Again, according to The Times:
 Were the Bill to pass into law with this section unchanged, it would have undesirable consequences.… It is an established principle of British tax law that it is the obligation of the client and not the adviser to make the necessary fiscal declarations. There seems to be insufficient reason to change that by introducing provisions that would be very difficult to enforce.
I suggest that there is not only insufficient reason but no possible justification. I hope that the Chief Secretary has for once at least arrived in the House armed with a white sheet and/or sackcloth and/or ashes and is prepared to accept the amendment with the appropriate sense of shame for what he has been trying to do.

Mr. Graham Page: It has been a long-established principle that in order that justice should properly be administered there should be confidentiality between a client and his legal adviser so that they may communicate frankly and unreservedly. For the solicitor or barrister this is part of the larger principle of confidentiality between advisers. This principle is clearly recognised by the courts in that no legal adviser, be he


barrister or solicitor, can be obliged to disclose that confidentiality in the court except with the client's consent. Unless the client knows that he has the protection afforded by the unqualified operation of this principle, he will not communicate freely with his legal advisers for fear that something he may say will come into the hands, in this instance, of the Inland Revenue or some other Government authority, and a serious curtailment of the rights of the individual to unfettered legal advice and representation then arises.
Paragraph 4 of Schedule 4 erodes the principle of the privilege of client and legal adviser. It requires
 any person, in the course of a trade or profession 
to disclose certain information. I am at a loss to understand why it includes "trade or profession ". This matter concerns mainly the legal and accountancy professions. We have never quite gathered from the Chief Secretary in previous debates on this subject why "trade" was included. Nevertheless, anyone who
 has been concerned with the making … of a settlement 
has to disclose certain information.
It might be said that he has to disclose only the names and addresses of certain persons. But the very fact that he discloses the names and addresses of, for example, the trustees of a settlement implies that those trustees
 are not or will not be resident in the United Kingdom ".
Otherwise he is under no obligation to give the names and addresses. Therefore, he is disclosing a confidence between himself and his client that the trustees of a settlement will not be resident in the United Kingdom. How on earth does he look into the crystal ball and decide that someone will not be resident in the United Kingdom at some future date? In those circumstances he has to give the names and addresses, and by doing that he is disclosing that he knows certain facts about both the settlor and the trustees.
7.45 p.m.
Indeed, paragraph 4 (3) brings into play another paragraph from Schedule 5. According to that paragraph, if the adviser discloses the names and addresses

to the Revenue, he is implicitly giving information about those persons.
When it was thought necessary to erode the principle of privilege between the legal adviser and his client for the purpose of Part XVII, Chapter III, of the Income and Corporation Taxes Act 1970, headed "Transfer of Assets Abroad ", which deals with only a minor part of income and corporation tax law, it was done with some specific provisos. For example, Section 481, having said that certain particulars should be given on receipt of notice from the Inland Revenue, goes on to provide in subsection (3):
 Notwithstanding anything in subsection (2) of this section, a solicitor shall not … in relation to anything done by him on behalf of a client, be compellable under this section, except with the consent of his client, to do more than state that he is or was acting on behalf of a client, and give the name and address of his client ".
It goes on specifically to indicate cases when that name and address should be given—for example, a body corporate, and so on. In Committee the Chief Secretary quoted this section as a precedent for Schedule 4, paragraph 4, but it goes nowhere near being a precedent for that provision.
One major difference is that under Section 481 of the Income and Corporation Taxes Act 1970 the information is required to be given only on notice by the Inland Revenue requesting it. There is a great difference between requiring legal advisers, as it were, to volunteer information about their clients and their doing so on receipt of a specific notice for that information from the Board of Inland Revenue.
The principle that a legal adviser can be obliged, albeit by statute if this paragraph is accepted by the House, to give information about his client's affairs whenever certain matters with which he is dealing for the client are specified in a statute is a serious erosion of the privilege between solicitor and client. Therefore, I suggest that there is no need for the Chief Secretary to press for the inclusion of this paragraph.
Another grave distinction between Schedule 4, paragraph 4, and Section 481 of the 1970 Act is that in the Bill there is no express inclusion of anything which is privileged. Whenever there has been any erosion of this privilege between legal


adviser and client on previous occasions, the House has seen fit to put in a specific clause such as that which I have read from Section 481—that a solicitor shall not be, in relation to anything done on behalf of his client, compellable except with the consent of his client—in short, that a solicitor shall not be compelled to breach the privilege of his client.
I say "the privilege of his client" deliberately, because this is not the privilege of the legal adviser. It is the privilege of the client, and, therefore, of the ordinary citizen, that he shall be enabled to consult his legal adviser frankly and freely and receive advice in the same spirit.
The Chief Secretary should accept the amendment readily. Although in principle there is a great distinction between this paragraph and the paragraph which is in the Bill, the amendment would provide the Revenue with more information than would the paragraph in the Bill. Our paragraph would give the information in the proper way. It would oblige the potential taxpayer to provide the Revenue with full information about the settlement and about the residence of the trustees.
In arguing this matter in Committee I proposed to the Chief Secretary that he should replace Schedule 4(4) by a direct duty on the taxpayer. I argued that the Chief Secretary should not seek to get this information by the back door as it were, that he should not seek to get the information by obliging legal advisers to disclose their client's affairs. I argued that clients should not be required to disclose information on notice, but should disclose it in a voluntary way, and then it should be only the name and address.
The amendment goes about it in the right way, but putting an obligation on the taxpayer to provide the Revenue with details of settlements. I should have thought that the Chief Secretary would jump at this and say that this was a reasonable amendment which breaks no established principles of law but merely requires the taxpayer to give information. There is no doubt but that if this paragraph were written into the Bill legal advisers would say to clients concerned "Here is the law. You must send the Revenue a copy of this settlement ".
I suppose that the Chief Secretary, with that benign smile which he is now putting on, will say "There would be terrible avoidance of tax if this were done ". I wonder whether he can identify avoidance of tax merely because names and addresses have not been given on previous occasions. Does he believe that his paragraph will be effective, or will he accept the amendment as providing a far better means of getting the information?

Mr. John Pardoe: Amendment No. 139 covers the same ground and, as I have already indicated, I reserve my position to ask for a separate vote on it. The reason I felt that this amendment, which was tabled in Committee, should be tabled again for the House to consider was that, though I entirely endorse and support Amendment No. 697, which was moved by the right hon. and learned Member for Surrey, East (Sir G. Howe), it occurred to me that the Government might hide from the principle behind some minutiae or trivia of the amendment—in other words, that it might be possible for the Chief Secretary to say "There is much to be said for what the Opposition have said, but the third comma in the fourth line is not quite in the right place. Therefore, I cannot accept the amendment ".
Just in case the Chief Secretary tries to evade the principle—this is very much a debate on principle—we have in reserve Amendment No. 139 which simply strikes out the powers which paragraph 4 gives to the Inland Revenue.
Paragraph 4 contains provisions requiring professional advisers to inform the Revenue of foreign settlements. In our view and in the view of many on both sides of the House—though I doubt whether we shall have much support in the Lobby when it comes to it—this is an objectionable principle.
The provision is objectionable in terms of history and in terms of our whole professional development over a very long time. It is, first, a gross interference in the professional relationship between the professional adviser and his client. Secondly, it is counter-productive, because it will make people furtive about their affairs.
I am tempted to ask what exactly is a professional relationship. I suppose it


is one for which one is paid if one is the professional adviser. I can imagine a situation in which certain sorts of professional advisers will put a notice on their desk, facing the client's chair, saying "If you intend to reveal anything which could possibly come within the scope of this provision I must advise you that the moment you utter those words you are not paying me for my advice."

Mr. Graham Page: I am wondering what the position of Members of the House is when their constituents tell them about a settlement which they have made.

Mr. Pardoe: That is a very interesting point. I am never quite sure whether a Member is in a professional relationship with his constituents if he is not professionally qualified. I imagine that he is not. I can see that the courts will have a field day on this.
It is an objectionable provision, thirdly, because it is unenforceable in the case of foreign advisers. No doubt we shall hear from the Chief Secretary how he intends to enforce it. It is objectionable, fourthly, because it poses a vague and unrealistic question for the British adviser.
I shall amplify those four points for the benefit of the Chief Secretary. In this country—indeed, in many other countries—professional privilege has, over the years, come to be regarded as of vital importance. This is not just one of those things dreamed up by professional people. I am not a professional man. I do not have a professional qualification, other than the votes I obtained to get to the House, if that is one. However, I believe that the confidentiality between the professional adviser and his clients is of the utmost importance, and that we should be extremely foolish if we took it lightly : This provision will prejudice the relationship in precisely those areas where it most needs to be nurtured.
The provision is counter-productive and will make people furtive in their affairs, because those who wish to escape their tax liabilities will have no difficulty in seeking advice anonymously, through foreign agents. It is possible that a flourishing industry will set up on the other side of the Channel, or in Ireland, or elsewhere, composed of British tax advisers, who will then have to establish that they themselves are not resident or

domiciled here, quite apart from advising trustees whether they are resident here. Those seeking the advice of such professional people will have to be advised "If you tell me what you propose to do I may have to tell the Revenue." This is contrary to public policy, and it is a pretty pointless exercise.
8.0 p.m.
The provision also purports to apply to a French advocate or notary as well as to a Channel Islands adviser. Indeed, the provision would be grossly unfair if it were to apply only to British advisers. Yet how does the Revenue propose to enforce it? Foreign advisers, like foreign taxpayers, owe no duty to the United Kingdom, and I cannot see that it is, therefore, in the least enforceable. Above all else, the provision involves the professional adviser deciding on two points which in many cases cannot possibly be answered by him. A man's domicile is often wholly uncertain.
I remember a debate shortly after I came into the House—it must have been in the late 1960s—when Lord Hailsham was replying to an amendment of mine which sought to remove the right of South Kensington and Chelsea voters to buy country houses in my constituency and register themselves there to vote in Chelsea or Kensington. I said that it ought to be possible in this House to define where one lived and where one was registered to vote. I remember the noble Lord giving me a long lecture—he was then a shadow Law Officer—on the difficulties of defining that sort of thing in English law. If it is difficult to define it as between South Kensington and Cornwall, it is even more difficult for some professional adviser to define where trustees live, or will live—which is pretty futuristic. It is particularly difficult for him in cases where a foreign settlement is under consideration.
The provision requires an answer to the question, "Where was the settlor domiciled?" Even disregarding the fact that the provision does not explain what is the relevant time at which the question has to be answered, it is one which the professional adviser, in honesty, cannot answer either way. Similarly, the provision requires an answer to the question, "Where will the trustees be resident?" and often he cannot say that for certain, either.
To add to the ludicrous nature of the provision, a professional adviser does not have to make a return if someone else has done it. I think that is a useless provision, since he has no power to find out whether the others involved have made a return. Suppose he asks them, or a client, and takes the client's word that no one has done it. Is that sufficient? No professional adviser owes a duty to anyone other than his client—certainly not to other advisers—so why should one tell another what he has done or not done?
It is not true, as the Chief Secretary said in Committee, that this is the same thing as had been done in previous cases. He quoted the relevant Act. This is an extension of the existing powers of the Inland Revenue. Let us make no mistake about that. At present the Inland Revenue has powers to require information under Section 481 of the Income and Corporation tax Act 1970, but the Revenue has to ask for it first. That is an important difference. Under that Act the adviser is under no duty to supply information except in answer to this question.
It is of some interest to quote the words of Mr. Justice Ackner, in a case which I suppose is really the classic of its sort in this matter—Clinch v. IRC. He said :
 Had such powers been reserved for use in the detection of the most serious offences in the criminal calendar, doubtless there would have been, not acclamation, but a public outcry, judged by the emotion that has been generated by the recent suggestion of a very learned Law Reform Committee that a judge should be allowed to suggest to a jury that silence could, if they thought fit, be considered by them as some evidence of the accused's guilt.
It seems to me, therefore, that we are being asked by the Government to advance into the field of tyrannical interference in the affairs of the individual and, in particular, into the affairs of an individual and his professional adviser.
The Chief Secretary, in Committee, expressed himself as rather surprised at the language used by hon. Members in describing this provision. He said that he was shocked at such words as "monstrous ". In fact, it is not just Members of Parliament who whip up this kind of thing for the benefit of the Committee stage. On 27th February a letter was written to The Times by three very

learned Members of the Bar, one of whom, Mr. Leolin Price, QC, said :
 The proposal would have us adopt the practice of totalitarian States ; for it has been their hateful practice—in Nazi Germany and Soviet Russia and elsewhere—to compel citizens to spy on their neighbours … It is easy to find reasons for any new demand that is made on behalf of the State. It is also fatally easy to step on to the slippery path to tyranny …
The excuses, the reasons which the right hon. Gentleman advanced in Committee, will no doubt be advanced again today—that the Inland Revenue cannot have its hands tied behind it, and must not be disadvantaged in finding the tax avoiders. No hon. Member on either side of the House wants to ease the path of those who break the law. At the same time, we cannot allow a situation to creep into our tax affairs in which the end always justifies the means.
There has been a great deal of controversy recently about the visit to this country of the former head of the KGB. I notice that the Secretary-General of ASTMS, Mr. Clive Jenkins, said in a television interview the other day that the head of the KGB was no different from the head of the British Secret Service. I thought that was a monstrous parallel. If this provision is passed, he would have done far better to say that the correct parallel might well be drawn between the head of the KGB and the President of the Board of Inland Revenue, because the Inland Revenue is becoming an organisation somewhere between the CIA and the KGB.

Mr. Esmond Bulmer: I support Amendment No. 697. I think it is absolutely true that when taxes go too far—that is to say, when they go beyond people's willingness to pay them—the law is undermined. We have seen the same thing in industrial relations in the last two years. In Holland it was found that a wealth tax between 1½ per cent. and 2 per cent. represented the difference between people's readiness to pay or not. If one remembers that inflation is running in excess of 20 per cent. in this country, capital gains tax at the present time represents a wealth tax more severe than that operating anywhere else in Western Europe.
In this Bill there is capital transfer tax which can inflict upon a family a tax in excess of 100 per cent. of the asset.


In this situation I have no doubt that the threshold has been crossed. The Government and the Revenue recognise this in the offending paragraph 4. I believe the effect will be as the hon. Member for Cornwall, North (Mr. Pardoe) has pointed out, that people will go overseas for advice. I do not need to say any more about that.
Secondly, I think that those who perhaps do not think in those terms will tend to revert to do-it-yourself advice. They will go to quarters which are perhaps not reputable and will cause the Revenue a lot more trouble. I believe it is axiomatic that the Revenue can function efficiently only with the help of responsible professionals. To the extent that the Bill in its present form makes this less likely, it is doing a disservice to the Revenue and to the Government.
The Government continue to miss the simple truth that if they try to close every loophole they will inflict grave economic damage on this country. We have seen it in forestry, and I believe that we shall see it in jobs. The Chancellor of the Exchequer has said that it is not possible to calculate how much revenue has been lost by evasion. Neither is it possible to calculate how many jobs will be lost because people will say that they cannot pay the capital transfer tax and will for that reason refrain from investing.
It has been said that Britons are Romans in the course of becoming Italians. There is, I believe, a real danger that, as these taxes ravage and the fires of inflation burn, we shall, indeed, become a nation of fiddlers. That process will not be stopped by forcing the professions to abandon confidentiality. It will be stopped, or, at least, it will be redressed, if the Government tackle inflation firmly, and if they reduce the confiscatory levels of taxation which they propose.

Mr. Ian Percival: Hon. Members have made a series of telling points, and, to avoid repetition, I shall dwell only on the wider aspect of this matter, though, before I do so, I must say that I agree wholeheartedly with everything said about the seriousness of the proposed breach of the principles of confidentiality which we have all for so long observed.
This is yet another instance of a Government putting administrative con-

venience before the rights of the individual. It is an obnoxious and dangerous practice, of which we have seen far too much in the last 10 years. It must stop.
The whole life of this country has for a long time depended to a very large extent upon respect for and observance of the law. One of the reasons for this respect for and observance of the law has been that people have recognised that, although not always successful, the purpose of the law, or one of its main purposes, has been to protect the weak from the strong, to protect the individual from the State.
Now, however, time and again we see the law being changed to give more strength to the already strong—in this instance, to the administration—at a time when most individuals already feel that the balance between the administration and the individual has become wholly wrong, that there is, indeed, no balance or anything approaching the balance that there should be, and that what is needed is more protection for the individual against the administration, not more power to the administration against the individual.
It is a thoroughly bad development when individuals feel, and rightly feel, that the law is constantly being used to give more strength to the already strong and is being used less and less to protect the individual from the strong.
There will be two practical consequences of this process unless we stop it. It will bring the law further into disrepute. It pains me to have to use the words "further into disrepute" since they connote that it has already been brought substantially into disrepute, and that is a terrible thing to have to recognise. But we delude ourselves if we do not recognise that one of the results of our activities as law makers in this House has been to bring the law substantially into disrepute. Our task is to stop it falling further into disrepute.
The second inevitable consequence is that if we allow the law to fall further into disrepute the temptation to ignore it will increase. It will be ironic if we here, who all say—sincerely, I am sure—that the laws of our country should be observed by all, make those laws so badly


as to render it inevitable that people pay less and less regard to them.
I understand, of course, that it would be very convenient administratively for the gentlemen in Whitehall and for Ministers to have these powers. It may well be that, without them, somebody would escape the net. But that is an argument to which there is no end. One can go on thinking of more and more things which would make it easier for the administrators to administer.
The further invasion of the rights of individuals entailed in gaining the small advantage of administrative convenience which these provisions represent is too high a price to pay. The giving up of that minimal or marginal administrative convenience, on the other hand, would be but a small price to pay for recognising for once that the rights of individuals are a lot more important in many instances than administrative convenience of the kind we are discussing here.
I hope that, both on such general grounds and for the detailed reasons advanced today, the Government will give way.

8.15 p.m.

Mr. Ian Gow: I support what was said by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) in moving his amendment. I do so for four principal reasons.
The primary liability to give information to the Revenue ought to lie with the prospective taxpayer and not with his professional advisers. I declare an interests here, in that I am a practising solicitor, and the principle of confidentiality between client and professional adviser is, for me, of the first importance. I hope that the Chief Secretary will tell us what discussions he had with the chartered accountants, the certified accountants, the Law Society, and the Bar Council. Presumably, he had discussions with all those bodies, not least in order to exclude barristers from the provisions of paragraph 4—the part of the schedule which we find so objectionable.
My second objection to paragraph 4 is that it is drafted in an extremely sloppy way. When the Chief Secretary was dealing with this matter in Committee—this was on 18th February—his hon. Friend

the Member for Nottingham, East (Mr. Dunnett) raised the question whether a will amounted in law to a settlement. It is well known that after the death of a testator trusts frequently come into operation. I hope that the Chief Secretary will deal with that matter tonight, because it is one of immense practical significance for chartered accountants and solicitors.

Sir Geoffrey Howe: It appears that Amendment No. 144 in the name of the Chancellor of the Exchequer is intended to meet that point by dealing separately with any settlement made by will, but my hon. Friend may care to give consideration to the possibility which strikes me, that although intended to meet the point it fails to do so because it separates any settlement made by will and any other settlement, so that the sub-paragraph would read :


"(a) any settlement made by will, or
(b) any other
settlement if such a return in relation to "—
and so on. It seems probable that it will apply exactly as it did as originally drafted. Perhaps the Chief Secretary, if not my hon. Friend, will give thought to that. I do not think that the right hon. Gentleman can be saved by the printer from the consequences here.

Mr. Gow: I am grateful to my right hon. and learned Friend, since what he says emphasises my point. The Bill and the Chief Secretary's amendments are drafted in a sloppy way. Even on Amendment No. 144, what is the date from which the settlement made by a will operates? We all know that a will speaks from death. Does the Chief Secretary's amendment refer to the date of the will or the date of the death?
I wish to continue with my criticism of the drafting of paragraph 4 of the schedule. What is meant by the words
in the course of a trade or profession carried on by him … has been concerned with the making … of a settlement and knows or has reason to believe … that the trustees of the settlement are not or will not be resident in the United Kingdom."?
How can a professional man—a chartered accountant or solicitor—possibly know who the trustees of a will, the executors of a will or the trustees of a settlement are to be in the future, and whether or not they will be resident in the United Kingdom? This is pure crystal ball gazing.


In Standing Committee the Chief Secretary failed to answer the point when it was raised by the hon. Member for Nottingham, East on 18th February.
Why are barristers to be excluded from the provision? The Opposition can only assume that as a result of a guilty conscience, and as a sop to his conscience, the Chief Secretary has exempted barristers. I urge the Government to accept that a principle of the greatest importance is at stake here. The obligation to make a disclosure should rest with the taxpayer when he completes his tax return each year. It would be a perfectly simple matter for the Chief Secretary to ask, in the tax return form, whether the taxpayer had made a settlement during the previous 12 months. It the Chief Secretary is prepared to listen to arguments he should accept the amendment, which seeks to reinforce the principle that we have followed down the centuries, that of confidentiality between a professional man and his client.
If the Government persist in their intention the consequence will be that professional men will set up business overseas—perhaps in the Republic of Ireland—and the Chief Secretary will not get his information. It is time the Government stopped setting up this growing network of informers. I hope that the Chief Secretary will accept the amendment.

Mr. Joel Barnett: May we first get one thing absolutely clear? We are not here discussing the average taxpayer on PAYE. Paragraph 4 deals with settlements and trusts. We can do without the gross exaggeration which has emanated from the Opposition benches. Conservatives have made the most far-fetched speeches imaginable. They have reached the height of absurdity. We are talking here about trusts and settlements which are often sophisticated tax avoidance schemes. We are asking only that the solicitor or other professional adviser should give the name and address of the settlor. That is the extent of this so-called monstrosity. It is nonsense for the Conservatives to talk about its being a snooper's charter. If there were disclosure with consent of the client there would, of course be no breach of privilege, and a solicitor would not be disclosing anything that the client was not himself obliged to disclose—

Sir G. Howe: That is not what the Government are providing for.

Mr. Barnett: The hon. and learned Gentleman must control himself. I have only just begun, and I shall be dealing with all the points he raised. If the client is not prepared to consent to the information being disclosed there is at least the possibility that he is contemplating evasion of tax, and not avoidance. If there were evasion, no privilege would be involved, at least to that extent.
When I hear hon. Members talking in the way they have been I am astonished. We must be clear what we are talking about. When they say that this is a great infringement of personal liability they seem to forget that many democratic countries have much wider powers than we are endeavouring to take —[An HON. MEMBER : "East Germany? "] The hon. Member should know better than to say that, but perhaps he does not. Other democratic countries take much wider powers to ensure that when there is a tax on the statute book it is paid. That is why they take those powers, and that is why we give powers to the extent we do to the Inland Revenue. Here we are talking about the possibility, which we know exists, of settlements being arranged in a way that the Revenue would never find out about. We discussed this matter in Standing Committee at great length.
We cannot go to a foreign professional man and obtain information, because we do not have the power. Frequently, however, a professional man in this country will know about a professional man abroad who is setting up a particular trust. It is not asking too much that the Revenue should have the name and address of the settlor and the trustee. That is all that paragraph 4 seeks to ensure.
I now turn to the amendment moved by the right hon. and learned Member for Surrey, East (Sir G. Howe), not the Liberal amendment, which wants to go the whole hog and remove the paragraph altogether. The right hon. and learned Gentleman's amendment would provide that in place of paragraph 4 there should be a sanction of nullity. I venture into these matters with great trepidation. When I see distinguished Conservative lawyers present I am reluctant to venture into such


areas, but I shall deal with some of the fairly straightforward points.
Where a United Kingdom settlor makes an overseas settlement it would place on the settlor the obligation to supply a copy of the settlement and any other necessary information to the board, and if he failed to do so the settlement would be void. Paragraph 4 broadly requires certain persons concerned with the making of a settlement to inform the Revenue if they know the trustee will not be resident in the United Kingdom.
The method the amendment chooses to deal with the matter was considered when the Bill was being prepared, but we rejected it as being impractical. The idea of imposing a sanction of nullity is to be found in the income tax legislation of some countries, and it would enable the Revenue to disregard, for tax purposes, transactions entered into for the purpose of avoiding tax. Provisions of this kind have created considerable problems in practice, because when one disregards what has happened in reality it is not always easy to know what should be hypothetically substituted for it. In any event, the function of an "annihilation" provision for capital transfer tax would be quite different from its function for income tax. Despite the practical difficulties it may be a sensible aim, in income tax matters, to say that a man should still be treated as taxable on the income of which he has sought to divest himself.
On the other hand, it scarcely makes sense, in the context of capital transfer tax, to penalise a man for trying to evade tax when he transfers his property by saying that he is to be treated as still having it, which is what the amendment would do. This would be to wipe out the effect of the charge, which would be a rather strange method of rewarding attempted evasion of the tax.
I understand that the right hon. and learned Gentleman may support the amendment on the footing that the sanction of nullity would not be effective for capital transfer tax purposes, but would be effective for all other purposes. If that is so, the intention would require to be spelled out rather more explicitly than it is.
8.30 p.m.
Apart from the reasons that I have just given, there is another very important one. Besides the fact that the United Kingdom legislature cannot effectively impose a sanction of nullity if a transaction is governed by foreign law—and nine times out of 10, settlements of this kind would be made with overseas trustees—the property transferred when a settlement is made will be held by trustees, who will be under a legal duty, enforceable in the jurisdiction where they live, to give effect to the terms of the settlement. It would be a completely empty gesture for the House of Commons to say that the property still belonged to the settlor, which is what the amendment would do.

Sir G. Howe: I acknowledge the skill with which the right hon. Gentleman has read the analysis of our amendment. Does he acknowledge, first, that any difficulties of the imperfections of the amendment would be overcome by accepting the Liberal amendment to delete the paragraph altogether? Secondly, does he acknowledge that the fact that he has had to appeal to the traditions of democratic countries unnamed by way of precedent proves that this is an innovation without precedent in the tax law of this country? Thirdly, does he acknowledge that when he says that this is not of general application but applies only to settlors, that does not affect the fact that it is a departure of principle, that it is an innovation just as damaging, if it affects millions of people in the magistrates' courts, as if it affects settlors in one jurisdiction? Does he acknowledge those three things—first, that the Liberal amendment would knock it out ; secondly, that there is no precedent in this country ; thirdly, that it is an important departure of principle?

Mr. Barnett: I recognise that the Liberal amendment would knock it out, but I am not prepared to recommend my hon. Friends to accept that amendment. It is true that we are extending our present law in these matters—I have never sought to deny it—but if we are putting a tax on the statute book, it is right that the Revenue should be able to enforce it if people seek to evade it, particularly when it is a tax that enormously reduces the extent to which


the former estate duty could be avoided. Clearly, opportunities will be taken wherever possible to find whatever loopholes may be available, and what the right hon. and learned Gentleman is seeking to do is to put in another loophole.

Mr. Gow: Mr. Gow rose—

Mr. Barnett: I am still replying to the right hon. and learned Gentleman. I said that it was with some trepidation that I entered upon these legal discussions with right hon. and learned and hon. and learned Gentlemen opposite. I am honoured and flattered that the right hon. and learned Gentleman has recognised that I have taken the point that he was trying to make and that he has appeared to recognise that his own amendment would not deal with the problem. I hope that he will appreciate that all his amendment would do would be simply to cancel out any transaction that was a virtual form of evasion, so that there would be no tax where there should be tax.

Mr. Gow: The right hon. Gentleman has now conceded that there is a breach of an established principle. He has sought to justify it on the ground that it will not affect many people. Surely the number of people affected by a breach of principle is irrelevant. The Government must be the champion of all and not just the champion of what they call the big battalions.

Mr. Barnett: The hon. Gentleman must understand that what is on the statute book now is not necessarily right for all time. If he is saying that, it is a strange philosophy that he is attempting to put to the House. I am saying that if the Revenue is left without these powers, and it has been without these powers for many years, enormous opportunities will be available for a small minority of people to use trusts and settlements to avoid tax liability.
If we are putting a new tax on the statute book, it is not unreasonable to provide that the Revenue shall have power to enforce it. If that is extending a principle, I accept and support it.

Mr. Powell: Is there any limitation on personal liberty that could not be justified on exactly the arguments that the right hon. Gentleman is putting?

Mr. Barnett: We are not talking about any extension. We are talking about an extension to trusts and settlements set up specifically by a small number of people who are seeking to avoid tax. It would be the height of absurdity to suggest that the Inland Revenue should tie at least one hand behind its back when dealing with this kind of person. That would be nonsense. I am sorry, but I cannot accept it.

Sir G. Howe: Surely the right hon. Gentleman accepts that almost all the law enforcement authorities, be they the Inland Revenue or any other, have so far managed to govern a free society with one hand tied behind their backs, and that it is a principle that a professional adviser shall not be required, without notice and without the consent of his client, to inform upon his client to the authorities of the State? We have survived through the centuries, upholding that principle and being dependent upon it. Does the Chief Secretary suggest that the new tax is an innovation of such catastrophic importance that that principle should be overthrown? Where do we go from here? Why is it justified?

Mr. Barnett: The right hon. and learned Gentleman is right in saying that this principle has lasted for a long time, but during that time many people have avoided their fair share of tax whilst the vast majority of ordinary taxpayers have paid theirs. I cannot believe that what the right hon. and learned Gentleman is seeking to do is to ensure that that kind of situation should continue. I am not prepared to recommend my hon. Friends to support the amendment.

Mr. David Howell: The Chief Secretary has gone too far this time, and I believe he knows it, with his uncharacteristic outburst at the end containing as it did the absurd statement, which he will regret when he reads it in Hansard, about how many people evade their fair share of tax.

Mr. Graham Page: The Chief Secretary did not talk about evading. He was talking all the time about avoiding tax. Why should not people avoid paying tax? Why do they have to be snooped on if they are doing a legal act?

Mr. Howell: My right hon. Friend is correct. We are dealing with a Government and a Chief Secretary who believe


that the act of life is a loophole to avoid death. Therefore, for those who are not prepared to die and be liable for estate duty the loophole of life must, because of the Chief Secretary's way of looking at things, be made much more difficult.
The right hon. Gentleman has gone too far. There is no precedent for this. Section 481(3) provides no precedent for the new provisions in paragraph 2 of the schedule. Under Section 481(3) it is the Revenue which calls upon the solicitor or the agent making the return, but that is not the case under this paragraph. This paragraph breaches the principle of privileged communication between a solicitor and his client or whoever in the broad terms of the paragraph is concerned with making the settlement. Secondly—and the Chief Secretary did not mention this when he spoke about what the Revenue was being asked to do—it places the onus or obligation on a solicitor or whoever is concerned with the making of the settlement.
These are new principles without precedent, and the Chief Secretary has sought to defend them both here and in Committee upstairs by what might be called a housemaid's baby talk. First, he used the argument "Do not worry. It is only just names or addresses. It is a small matter of giving that information ". Secondly, he used the argument "Do not worry. It is only a small amount of privacy that is being surrendered." I should like to take both those thin ends of larger wedges and examine the sharpness of them with my thumb.
I invite the House to think first about the phrase "only names and addresses "We know that it is a small step from there to "If he is not at that address, where did he go? If he is no longer at that address, when did he leave? What are his or her movements? What were his or her movements after a certain time? Why did he go? Who was he with? What was he seeking? What was he trying to avoid? "We know the cataclysm of questions that can follow from the innocent matter of the name and address. We have heard it happen in other countries, be they the Chief Secretary's democracies

to which he irrationally refers, or those where the word "democracy" is not used in a way which we would recognise. We know what a large wedge that is, and we know how much can follow from that simple question "Only your name and address, please ; that is all we want. The only obligation is to provide the name and address."
We come to the second easy little phrase that pops in almost unobtrusively "just a small amount of privacy ". How the Chief Secretary measures a small amount of privacy I do not know. Privacy is becoming increasingly valued as it diminishes, and it diminishes fast. The more it diminishes, the more crucial it is. When a Minister says that by decree—it is little less than that with the guillotine on the debate—a small further amount of privacy is to be removed, we ask "What will there be in exchange? "What has the Minister given to the community? What has the Minister given in the eyes of the people who govern the affairs of the country to be sacrificed against this further surrender of privacy?
We are told nothing, except some generalisations from the Chief Secretary about many people not having paid their fair share of tax and having avoided tax by not dying. He seems to think that it is time they did die so that they could pay this ill-chosen tax instead of estate duty. That is a silly argument related to a dangerous and serious principle on which we are being asked to give way.
There are other difficulties with the Government's proposals and their Amendment No. 144. I know that the Chief Secretary is trying to meet the point made by the hon. Member for Nottingham, East (Mr. Dunnett) in Committee about settlements under will. As the hon. Gentleman rightly said, how is one to know whether from 26th March—remember, the legislation runs from a year ago—one has been concerned in making a will which might have led to a settlement which might become liable under this provision? It is impossible to know. I am doubtful whether Amendment No. 144 meets the need to rule out all settlements under a will. Although it rules them out, it immediately rules them in again by the additional provisions in the rest of the


amendment. It would be fair for the House to have a better explanation of that than the one which the Chief Secretary gave.
Another aspect raised in Committee but not this evening is the chilling one of retrospection. We are almost reduced to shrugging our shoulders at each new retrospective incursion the Government make, regardless of whether they were in power, which Parliament was sitting at the time and whether a previous Parliament overruled them. All these propositions, courtesies and customs have been thrown out.
Here is another. Because of the retrospective nature of the legislation, confidential discussions which took place between March and November between clients and solicitors, agents or other advisers are not confidentially protected. When it became clear that the Government were going much further, although there had been no indication of that beforehand, those privileged confidential discussions became not confidential at all. By a law which the participants did not know about at the time, which was not threatened and which was not on the statute book, if the Bill reaches the statute book those conversations at that time will become not privileged and not confidential.
That is a monstrous and lethally sinister move of a kind that makes Government's other retrospective efforts in the Bill look relatively pale and paltry. It stretches into the most intimate and detailed relationships between the professional adviser and his client which we have succeeded in defending over many years and through many crises. When the pressure has been, in war and in peace, to do things which may infringe liberty for the greater good, we have succeeded in defending this precious privilege, amongst others.
8.45 p.m.
That is a triumph and a victory for the basis of our liberties. Now it is to go because the Chief Secretary is worried about all those people who were undermining the principles and being unfair in insisting on escaping the death duties which he believes should have applied to all. The right hon. Gentleman has said that all that is being asked is that

the Revenue shall have the names and addresses. He added one other category.
That is just not true. Many hon. Members respect the Chief Secretary and believe that he has had a rough deal at the hands of some of his colleagues. He is no doubt in great difficulty even now, not only on this Bill but on other matters of public expenditure as he tries to keep at bay the maniacs in his Government, who would inflate public expenditure to the point when the pound is hardly worth the paper it is written on. We appreciate the difficulties he is under. Why does he stand up and tell us something that is not true?
The schedule not only enables the Revenue to have the names and addresses—that is an incursion into privilege about which we have complained—but it places the obligation on the citizen-informer, on the agent of his own volition, to give the names and addresses required. This is not in response to a request by the Revenue, as under Section 481, not in response to a normal provision or request of any kind from the authorities.
It would not only be names and addresses. This is a shabby piece of work, shabbier than much of the work that the Chief Secretary has had to undertake at the behest of his colleagues in the name of Heaven knows what. Of all the aspects of this lethal tax, this is the nastiest, and my hon. and right hon. Friends should have no hesitation whatever in supporting the amendments. If there are difficulties in the drafting of our amendment, we accept them. I urge my hon. and right hon. Friends to support the Liberal Amendment No. 139 and to wipe this vicious provision out of this vicious Bill.

Question put, That the amendment be made :—

The House proceeded to a Division—

Miss MARGARET JACKSON and Mr. JOHN ELLIS were appointed Tellers for the Noes but, no Member being willing to act as Teller for the Ayes, Mr. DEPUTY-SPEAKER declared that the Noes had it.

Amendment negatived.

Amendment proposed: No. 139, in page 57, leave out lines 9 to 27.—[Mr. Pardoe.]

Question put, That the amendment be made :—

The House divided: Ayes 240, Noes 264.

Division No. 136.]
AYES
[8.48 p.m.


Adley, Robert
Gow, Ian (Eastbourne)
Morrison, Charles (Devizes)


Alison, Michael
Gower, Sir Raymond (Barry)
Morrison, Hon Peter (Chester)


Arnold, Tom
Grant, Anthony (Harrow C)
Neave, Airey


Atkins, Rt Hon H. (Spelthorne)
Gray, Hamish
Nelson, Anthony


Awdry, Daniel
Grieve, Percy
Neubert, Michael


Bain, Mrs Margaret
Griffiths, Eldon
Newton, Tony


Baker, Kenneth
Grist, Ian
Nott, John


Banks, Robert
Grylls, Michael
Onslow, Cranley


Bell, Ronald
Hall, Sir John
Oppenheim, Mrs Sally


Bennett, Sir Frederic (Torbay)
Hall-Davis, A. G. F.
Page, John (Harrow West)


Bennett, Dr Reginald (Fareham)
Hampson, Dr Keith
Page, Rt Hon R. Graham (Crosby)


Benyon, W.
Hannam, John
Pardoe, John


Berry, Hon Anthony
Harrison, Col Sir Harwood (Eye)
Parkinson, Cecil


Biffen, John
Havers, Sir Michael
Penhaligon, David


Biggs-Davison, John
Hawkins, Paul
Percival, Ian


Blaker, Peter
Henderson, Douglas
Peyton, Rt Hon John


Boscawen, Hon. Robert
Heseltine, Michael
Pink, R. Bonner


Bowden, A. (Brighton, Kemptown)
Hicks, Robert
Powell, Rt Hon J. Enoch


Boyson, Dr. Rhodes (Brent)
Holland, Philip
Prior, Rt Hon James


Brotherton, Michael
Hordern, Peter
Pym, Rt Hon Francis


Brown, Sir Edward (Bath)
Howe, Rt Hn Sir Geoffrey
Raison, Timothy


Buchanan-Smith, Alick
Howell, David (Guildford)
Rathbone, Tim


Buck, Antony
Howells, Geraint (Cardigan)
Rees, Peter (Dover &amp; Deal)


Budgen, Nick
Hunt, John
Rees-Davies, W. R.


Bulmer, Esmond
Hurd, Douglas
Renton, Rt Hon Sir D. (Hunts)


Burden, F. A.
Hutchison, Michael Clark
Renton, Tim (Mid-Sussex)


Butler, Adam (Bosworth)
Irving, Charles (Cheltenham)
Ridley, Hon Nicholas


Carlisle, Mark
James, David
Ridsdale, Julian


Carson, John
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Rifkind, Malcolm


Chalker, Mrs Lynda
Johnson Smith, G. (E. Grinstead)
Roberts, Michael (Cardiff NW)


Channon, Paul
Jones, Arthur (Daventry)
Roberts, Wyn (Conway)


Clark, Alan (Plymouth, Sutton)
Joseph, Rt Hon Sir Keith
Ross, Stephen (Isle of Wight)


Clark, William (Croydon S)
Kershaw, Anthony
Ross, William (Londonderry)


Clarke, Kenneth (Rushcliffe)
Kilfedder, James
Rost, Peter (SE Derbyshire)


Clegg, Walter
King, Evelyn (South Dorset)
Sainsbury, Tim


Cockcroft, John
King, Tom (Bridgwater)
St. John-Stevas, Norman


Cooke, Robert (Bristol W)
Knight, Mrs Jill
Shaw, Giles (Pudsey)


Cope, John
Knox, David
Shelton, William (Streatham)


Cormack, Patrick
Lamont, Norman
Shepherd, Colin


Costain, A. P.
Lane, David
Shersby, Michael


Crawford, Douglas
Langford-Holt, Sir John
Silvester, Fred


Critchley, Julian
Latham, Michael (Melton)
Sims, Roger


Davies, Rt Hon J. (Knutsford)
Lawrence, Ivan
Sinclair, Sir George


Dean, Paul (N Somerset)
Lawson, Nigel
Skeet, T. H. H.


Dodsworth, Geoffrey
Le Marchant, Spencer
Smith, Dudley (Warwick)


Douglas-Hamilton, Lord James
Lester, Jim (Beeston)
Speed, Keith


du Cann, Rt Hon Edward
Lewis, Kenneth (Rutland)
Spence, John


Durant, Tony
Lloyd, Ian
Spicer, Michael (S Worcester)


Eden, Rt Hon Sir John
Luce, Richard
Sproat, Iain


Edwards, Nicholas (Pembroke)
MacCormick, Iain
Stainton, Keith


Elliott, Sir William
McCrindle, Robert
Stanbrook, Ivor


Emery, Peter
Macfarlane, Neil
Stanley, John


Evans, Gwynfor (Carmarthen)
MacGregor, John
Steel, David (Roxburgh)


Ewing, Mrs Winifred (Moray)
Macmillan, Rt Hon M. (Farnham)
Steen, Anthony (Wavertree)


Eyre Reginald
McNair-Wilson, M. (Newbury)
Stewart, Donald (Western Isles)


Fairbairn, Nicholas
McNair-Wilson, P. (New Forest)
Stewart, Ian (Hitchin)


Fairgrieve, Russell
Marshall, Michael (Arundel)
Stokes, John


Farr, John
Marten, Neil
Stradling Thomas, J.


Fell, Anthony
Mather, Carol
Tapsell, Peter


Finsberg, Geoffrey
Maude, Angus
Taylor, Teddy (Cathcart)


Fisher, Sir Nigel
Maudling, Rt Hon Reginald
Tebbit, Norman


Fletcher, Alex (Edinburgh N)
Mawby, Ray
Temple-Morris, Peter


Fletcher-Cooke, Charles
Maxwell-Hyslop, Robin
Thompson, George


Fookes, Miss Janet
Mayhew, Patrick
Townsend, Cyril D.


Fowler, Norman (Sutton C'f'd)
Meyer, Sir Anthony
Trotter, Neville


Fox, Marcus
Miller, Hal (Bromsgrove)
van Straubenzee, W. R.


Fraser, Rt Hon H. (Stafford &amp; St)
Mills, Peter
Vaughan, Dr. Gerard


Freud, Clement
Miscampbell, Norman
Viggers, Peter


Fry, Peter
Mitchell, David (Basingstoke)
Wainwright, Richard (Colne V)


Galbraith Hon. T. G. D.
Moate, Roger
Wakeham. John


Gardiner, 'George (Reigate)
Molyneaux, James
Walker, Rt Hon P. (Worcester)


Gardner, Edward (S Fylde)
Monro, Hector
Walters, Dennis


Gilmour, Sir John (East Fife)
Montgomery, Fergus
Watt, Hamish


Glyn, Dr Alan
Moore, John (Croydon C)
Weatherill, Bernard


Goodhart Philip
More, Jasper (Ludlow)
Wells, John


Goodhew, Victor
Morgan, Geraint
Welsh, Andrew


Goodlad, Alastair
Morgan-Giles, Rear-Admiral
Whitelaw, Rt Hon William


Gorst, John
Morris, Michael (Northampton S)
Wiggin, Jerry




Wigley, Dafydd
Wood, Rt Hon Richard
TELLERS FOR THE AYES:


Wilson, Gordon (Dundee E)
Young, Sir G. (Ealing, Acton)
Mr. A.J. Beith and


Winterton, Nicholas

Mr. Cyril Smith.




NOES


Abse, Leo
Fernyhough, Rt Hon E.
Marquand, David


Allaun, Frank
Flannery, Martin
Marshall, Dr Edmund (Goole)


Anderson, Donald
Fletcher, Raymond (Ilkeston)
Marshall, Jim (Leicester S)


Ashley, Peter
Fletcher Ted (Darlington)
Mason, Rt Hon Roy


Ashley, Jack
Foot, Rt Hon Michael
Meacher, Michael


Ashton, Joe
Ford, Ben
Mellish, Rt Hon Robert


Atkins, Ronald (Preston N)
Forrester, John
Millan, Bruce


Atkinson, Norman
Fowler, Gerald(The Wrekin)
Miller, Dr M.S.(E Kilbride)


Bagier, Gordon A.T
Fraser, John (Lambeth, N'w'd)
Miller, Mrs Millie (Ilford N)


Barnett, Guy (Greenwich)
Freeson, Reginald
Mitchell, R.C (soton, Itchen)


Barnett, Rt Hon Joel (Heywood)
Garrett, John (Norwich S)
Molly, William


Bates, Alf
Garrett, W.E.(Wallsend)
Moonman, Eric


Bean, R. E.
George, Bruce
Morris, Alfred (Wythenshawe)


Benn, Rt Hon Anthony Wedgwood
Gilbert, Dr John
Morris, Charles R. (Openshaw)


Bennett, Andrew (Stockport N)
Ginsburg, David
Mullley, Rt Hon Frederick


Bidwell, Sidney
Golding, John
Mulley, Rt Hon Frederick


Blenkinsop, Arthur
Gourlay, Harry
Murray, RT Hon Ronald King


Boardman, H
Graham,Ted
Newens, Stanley


Booth, Albert
Grant, George (Morpeth)
Noble, Mike


Boothroyd, Miss Betty
Hamilton, James (Bothwell)
Oakes, Gordon


Bottomley, Rt Hon Arthur
Hamilton, W. W (Central Fife)
Ogden Eric


Boyden, James (Bish Auck)
Hardy Peter
O'Halloran Michael


Bradley, Tom
Harper, Joseph
Orbach, Maurice


Bray Dr Jeremy
Harrison, Walter(Wakefield)
Ovenden, John


Brown, Hugh D. (Provan)
Hatton, Frank
Padley, Walter


Brown, Robert C.(Newcastle W)
Healey, Rt Hon Denis
Palmer, Arthur


Brown, Ronald (Hackney S)
Hooley, Frank
Park, George


Buchan, Norman
Hooley, John
Parker, John


Buchanan, Richard
Howell, Denis(B'ham, Sm H)
Pavitt, Laurie


Butler, Mrs Joyce(Wood Green)
Hoyle, Doug (Nelson)
Pendry, Tom


Callaghan, Jim (Middleton &amp; P)
Huckfield, Les
Perry, Ernest


Campbell, Ian
Hughes, Rt Hon C.(Anglesey)
Phipps, Dr Collin


Canavan, Dennis
Hughes, Mark (Durham)
Prentice, Rt Hon Reg


Cant, R. B.
Hughes, Robert(Aberdeen N)
Prescott, John


Carmichael, Neil
Hughes, Roy (Newport)
Price, William (Rugby)


Carter, Ray
Hunter, Adam
Radice, Giles


Carter-Jones, Lewis
Irving, Rt Hon S (Dartford)
Richardson, Miss Jo


Cartwright, John
Jackson, Colin (Brighouse)
Roberts, Albert (Normanton)


Castle, Rt Hon Barbara
Jay, Rt Hon Douglas
Roberts, Gwilym (Cannock)


Clemitson, Ivor
Jeger, Mrs Lena
Robertson, John (Paisley)


Cocks, Michael (Bristol S)
Jenkins, Hugh (Putney)
Roderick, Caerwyn


Cohen, Stanley
Johnson, James (Hull West)
Rodgers, George (Chorley)


Coleman, Donald
Johnson, Walter (Derby S)
Rooker, J.W.


Colquhoun, Mrs Maureen
Jones, Alec (Rhondda)
Roper John


Concannon, J. D.
Jones, Barry(East Flint)
Rose Paul B.


Conlan, Bernard
Jones, Dan (Burnley)
Ross, Rt Hon W.(Kilmarnock)


Cook, Robin F. (Edin C)
Judd, Frank
Rowland, Ted


Corbett, Robin
Kaufman, Gerald
Ryman, John


Cox, Thomas (Tooting)
Kelley, Richard
Sandelson, Naville


Craigen, J. M. (Maryhill)
Kerr, Russell
Sedgemore, Brain


Cronin, John
Kilroy-Silk, Robert
Selby, Harry


Cryer, Bob
Kinnock, Neil
Shaw, Arnold(Ilford South)


Cunningham, G. (Islington S)
Lambie, David
Sheldon, Robert(Ashton-u-Lyne)


Cunningham, Dr J. (Whiteh)
Lamborn, Harry
Shore Rt Hon Peter


Dalyell, Tarn
Lamond, James
Short, Rt Hon E.(Newcastle C)


Davidson, Arthur
Latham, Arthur (Paddington)
Short, Mrs Renée(Wolv NE)


Davies, Bryan (Enfield N)
Lee, John
Silkin, Rt Hon John(Deptford)


Davies, Denzil (Llanelli)
Lever, Rt Hon Harold
Silkin, Rt Hon S.C.(Dulwich)


Davies, Ifor (Gower)
Lewis, Arthur (Newham N)
Sillars, James


Davis, Clinton (Hackney C)
Lewis, Ron (Carlisle)
Silverman, Julius


Deakins, Eric
Lipton' Marcus
Skinner, Dennis


Dean, Joseph (Leeds West)
Litterick, Tom
Small, William


Delargy, Hugh
Lomas, Kenneth
Smith, John (N Lanarkshire)


Dell, Rt Hon Edmund
Loyden, Eddie
Snape, Peter


Dempsey, James
Luard, Evan
Spearing, Nigel


Doig, Peter
Lyon, Alexander(York)
Spriggs, Leslie


Dormand, J. D.
Lyons, Edward(Bradford W)
Stallard, A.W.


Douglas-Mann, Bruce
Mabon, Dr J Dickson
Stewart, Rt Hon M.(Fulham)


Duffy, A. E. P.
McCartney, Hugh
Stoddart, David


Dunn, James A.
McElhone, Frank
Stott, Roger


Dunnett, Jack
McGuire, Michael (Ince)
Strang, Gavin


Eadie, Alex
Mackenzie, Gregor
Strauss, Rt Hn G. R.


Edge, Geoff
Mackintosh John P.
Summerskill, Hon Dr Shirley


Ellis, Tom (Wrexham)
Maclennan, Robert
Taylor, Mrs Ann (Bolton W)


English, Michael
McMillan Tom (Glasgow C)
Thomas, Jeffrey (Abertillery)


Ennals, David
McNamara Kevin
Thomas, Mike (Newcastle E)


Evans, John (Newton)
Madden Max
Thomas, Ron (Bristol NW)


Ewing, Harry (Stirling)
Mahon, Simon
Thorne, Stan (Preston South)


Faulds, Androw
Marks Kenneth
Tierney, Sydney







Tinn, James
Ward, Michael
Williams, Alan Lee (Hornch'ch)


Tomlinson, John
Watkins, David
Williams, W. T. (Warrington)


Tomney, Frank
Watkinson, John
Wilson, Alexander (Hamilton)


Torney, Tom
Weetch, Ken
Wilson, William (Coventry SE)


Urwin, T. W.
Wellbeloved, James
Wise, Mrs Audrey


Varley, Rt Hon Eric G.
White, Frank R. (Bury)
Woodall, Alec


Wainwright, Edwin (Dearne V)
While, James (Pollok)
Young, David (Bolton E)


Walden, Brian (B'ham, L'dyw'd)
Whitlock, William
TELLERS FOR THE NOES:


Walker, Harold (Doncaster)
Willey, Rt Hon Frederick
Miss Margaret Jackson and


Walker, Terry (Kingswood)
Williams, Alan (Swansea W)
Mr. John Ellis,

Question accordingly negatived.

9.0 p.m.

Mr. Ray Mawby: On a point of order, Mr. Deputy Speaker. I have made inquiries in various parts of the House on the question of hot food. I was assured in a number of areas, especially those areas that normally serve the staff with hot beverages, that gas was unavailable. Therefore, not only hon. Members, but members of the staff are denied hot beverages. Upon inquiry I have found that gas supplies to the building have not been cut. All those who are engaged in strike action should at least stand up and be counted and admit that they are on strike, or work properly to enable the staff to be supplied with hot beverages and whatever else is required.

Mr. Bob Cryer: Further to that point of order—

Mr. Deputy Speaker (Sir Myer Galpern): Let me deal with one point of order at a time. While I do so, perhaps the hon. Gentleman could bring me in a hot cup of tea. I do not know that the Chair can help the hon. Member for Totnes (Mr. Mawby). There are no facilities available. The proper quarter to which he should address his complaints is the Chairman of the Catering Committee. If he does that I shall certainly support him, because I am feeling rather chilly sitting up here.

Mr. Cryer: Further to that point of order, Mr. Deputy Speaker. I cannot bring you a hot cup of tea, because tea is not available. I am sure you will appreciate that this is because of an industrial dispute which is taking place. Is it in order for members of the Opposition to put forward silly and superfluous points of order which can only worsen an industrial dispute? Is it not characteristic of the sort of situation which brought this country to its knees in February 1974?

Mr. Deputy Speaker: We must not get ourselves involved in points of order in order to generate some heat. The trouble

with points of order is that one does not know what any hon. Member will say until he has said it. It may be silly or wise. It is a matter of opinion.

Amendment made : No. 140, in page 57, line 12, leave out 25th ' and insert 26th '.—[Mr. Joel Barnett.]

Amendment proposed : No. 144, in page 57, line 23, leave out ' any ' and insert—


'(a) and settlement made by will, or
(b) any other '.—[Mr. Joel Barnett.]

Mr. Graham Page: The amendment was not dealt with when we debated a previous group of amendments, although it was mentioned and a question was asked about it. Perhaps the Chief Secretary would be good enough to answer it now, if I repeat it.
The amendment seeks to deal with the point about a settlement made by will, but as it is printed on the Notice Paper it seems that the words following those to be omitted apply to both (a) and (b). It may be that printing those words on another line would enable us to see it correctly. Perhaps the Chief Secretary will see that that is done, so that the latter part of paragraph 4(2) does not apply to his new line
(a) any settlement made by will ".

Mr. Powell: I join in complaining of the lax drafting of the amendment, which is no doubt due to the fact that it was produced so hastily, and that it is a result of second thoughts.
It is not good drafting that the sense of a statute should depend upon the division of a sentence by the letters "a "and" b ", or upon punctuation. The amendment will make nonsense unless (a) and (b) are treated as introducing a separation of meaning into sub-paragraph 2.
All that was necessary in order to produce an elegant amendment, with the effect which the Government desired, was to insert, in line 12, after "settlement" the words "other than a settlement made by will ".
The amendment is an indication of the slovenly work we are bound to get if we attempt to pass a Finance Bill in the way we are doing.

Mr. Joel Barnett: I am sorry that both the right hon. Member for Crosby (Mr. Page) and the right hon. Member for Down, South (Mr. Powell) find the drafting inelegant and slovenly. It at least does what they both want. It carries out all undertaking I gave in Committee to exclude will settlements from paragraph 4. Not being as well versed in grammar, elegance or slovenly drafting as both right hon. Gentlemen, I took advice on the matter, and I am advised that the amendment meets the objectives which we all have.
The right hon. Member for Crosby suggested that the words
 has already been made by another person 
in sub-paragraph (2) would qualify (a) as well as (b). I am advised that it would he possible to produce that result only by a most perverse lay-out. That is not the case with the amendment, which I hope will be acceptable to the House.

Mr. David Howell: If we had a proper amount of time to discuss the Bill, we should send the amendment back to the kitchen to be heated up and served again in better form. It is one more example of the unholy muddle over the Bill. We need another stage to discuss the Bill, and it looks more and more as though the next Finance Bill will provide it. In the meantime, we shall have to take it as it is.

Mr. Barnett: The hon. Gentleman knows that he and his hon. Friends had ample opportunity to debate the Bill, and they refused to take the opportunity.

Amendment agreed to.

Mr. Joel Barnett: I beg to move Amendment No. 495, in page 61, line 14, at end add:
'or, in the case of a transfer made after 5th April and before 1st October in any year otherwise than on death, at the end of April in the next year'

Mr. Deputy Speaker(Sir Myer Galpern): With this it may be convenient to consider the following amendments to the amendment :

Amendment (a), in line 2, leave out '1st October' and insert ' 31st December '.

Amendment (b), in line 2, leave out ' April ' and insert September '.

It may also be convenient to consider Amendment No. 550, in page 61, line 14, at end insert:
' or when the tax has been agreed in writing between the person liable to pay and the Board, or has been determined and specified in a notice under paragraph 6 above, whichever is the later '.

Mr. Barnett: The amendment honours a Government commitment to reconsider the due date for tax on lifetime transfers and the date from which interest on that tax is to run. Together with a number of consequential amendments, it provides that in each case the date is to be the later of either six months from the end of the month in which the transfer occurs, or the 30th April following the end of the tax year in which the transfer is made. The consequential amendments increase from three to six months the time allowed for payment of tax on works of art which cease to be exempt.
I know that this does not go quite as far as some hon. Members wanted, but it is not an unreasonable way of dealing with the matter.

Mr. John MacGregor: As a result of the lengthy debates that we had on Schedule 4, paragraph 12 in Standing Committee we have at least this crumb of comfort. We are grateful for it, but in view of the fairly large plate of goodies that we offered the Chief Secretary we must have expected at least a slice of cake. This is an improvement, but I do not think that it goes far enough. I do not wish to delay the House for too long, but I should mention that in Standing Committee there were two main arguments for trying to get some amendment of the time in which people are to be allowed to pay the tax.
The first main argument was that of administrative convenience. That was concerned mainly with administrative convenience for the taxpayer and his advisers, and not so much with the convenience of the Revenue. There are two main points to be made about administrative convenience. The first is that despite this change there is still a difference between the time at which the taxpayer has to deliver his accounts on chargeable transfers and the time at which payment of the tax has to be made.
Despite the Government's amendment, the only month, as I understand it, in which the taxpayer will find that he is having to deliver both his account and his tax at the same time will be April. He is allowed 12 months for the delivery of his account, but in most cases the period ranges from anything between six to 12 months—it is 12 months in the case of April—for the payment of tax. Although we pressed him on this matter in Standing Committee, the Chief Secretary still has it the wrong way round. He is asking most taxpayers to pay their tax first and to give the Revenue the information later as to the basis on which the tax has been assessed.
The second point to be made on the administrative convenience argument is that relating to normal tax returns. The majority of taxpayers usually make only one return a year. They may now find themselves having to make one return for income and a separate return both for payment of the capital transfer tax and for their accounts for the tax. There is no other tax which involves this very hasty requirement for the payment of the tax shortly after the end of the tax year. For the capital transfer tax, and in the case of every chargeable transfer, the right hon. Gentleman is asking for about three weeks from the end of the tax year for a taxpayer to pay his tax in many cases, when in nearly every other form of tax there is a much longer period.
Amendments (a) and (b) have been designed to try to help the situation. I realise that they are not totally neat models. I accept that there is a small drafting mistake in Amendment (b), in that it should read "2nd April" and not "1st April ". I call only say that that is due to the haste with which many of us had to draft our amendments to the Government amendment. I am sure that that is a point that applies to many other amendments. Such errors are due entirely to the lack of time that we had to draft our amendments correctly. But by the amendment we were trying to achieve in Standing Committee a situation in which a taxpayer would be given a reasonable period, between three and six months after the end of the tax year, in which to submit his return and pay his tax.
The second main argument relates to the time that it takes to value many of the assets involved in chargeable transfers. It is to that point that Amendment No. 550 relates. In Standing Committee the Chief Secretary at one point said that we had misunderstood the purpose of the tax in talking of a year of assessment. On the year of assessment the right hon. Gentleman said :
 There is, of course, no such thing as far as capital transfer tax is concerned. Capital transfer tax is not an annual tax as such, and under the Bill as it stands it is due six months after the lifetime transfer. That is the reason for the misunderstanding about the fact that the due date for payment of tax can sometimes come before the actual return is delivered."— [Official Report, Standing Committee A, 18th February 1975 ; c. 2037.]
But in some cases in the capital transfer tax there is a year of assessment—for example, in all the exemptions under Schedule 6 to which the £1,000 a year relates—and the Bill itself states what the year is, and also with reference to exemptions out of income.
9.15 p.m.
I do not think that that is a strong enough argument. It would be right still to look at the end of the year of assessment as the right date from which to begin to assess the chargeable transfer. In many cases there will be a considerable time lag before, even between the taxpayer and the Revenue, the value the asset has been agreed, and there is nothing in the Bill to allow the taxpayer to pay his tax after the valuation has been agreed. That is quite different from the situation in relation to capital gains tax, which is another capital tax and not an income tax, where the taxpayer is given the alternative of three months after the end of the year of assessment or 30 days after the assessment has been agreed with the Revenue. Some provision of that kind would also be justified in relation to the payment of the capital transfer tax.
There is one final matter in relation to the time that it will often take to value the asset. That is the point which the Chief Secretary made in Committee when he said that under estate duty executors were given 12 months from the death to assess the tax payable and to pay it. Again we come back to the point which we have had to make time after


time to the Chief Secretary about the capital transfer tax, that the chargeable transfer in life is a totally different form of tax. There will be many cases where taxpayers will not know until the end of the year what chargeable transfer they should return and, therefore, what tax they should be paying.
I have mentioned the exemptions—the exemption out of income and the £1,000 exemption. Now the situation has been complicated by a Government amendment, which we welcome, to give the small gifts exemption of £100. But it makes it more difficult for the taxpayer to know at what point he moves into the chargeable transfer area. There is also the question of deemed transfers, which again he will not now have to pay until 1976. Even so, there will be a complication for the taxpayer.
Having listened to the arguments of the Chief Secretary in Committee and having re-read them and reconsidered the matter, it still seems to me that the taxpayer will be put in some difficulty if the Government insist on this early payment of tax and because he has to make his return for tax at a different point from that at which he pays the tax.
For reasons of progress, I doubt whether the Opposition will press these amendments. But I hope that the Chief Secretary will reconsider for the next Finance Bill the valid argument that it would still be right to bring into line the point at which the taxpayer has to make his return and to pay his tax, and that this should be either three or six months after the end of the tax year in which the chargeable transfers took place, with provision for the later payment where agreement has still not been reached as to the value between the taxpayer and the Revenue, as outlined in Amendment No. 550. If the right hon. Gentleman cannot agree to do that, I hope at least that he will ensure reasonable interpretation by the Inland Revenue, when it comes to enforcing the payment of this tax from people with chargeable transfers, to take account of these arguments.

Mr. Ridley: I do not think that these provisions are yet right. This is a very suitable candidate for the next stage of this Bill, which we understand is now to be the next Finance Bill itself. I am sure that we all look forward to another

attempt to improve this monstrous, outrageous abortion of a tax. I am prepared to debate as many Bills in a row as may be necessary to make some dint in the thick skins of Treasury Ministers.
I want to ask what happens in the case of a very protracted valuation dispute. I heard the other day of a private company and a dispute about the valuation of shares which went on for eight years.
What is the taxpayer supposed to do under capital transfer tax? I presume that he is to pay on some mythical value and the matter will be adjusted at a later stage.
With life-time transfer accumulations there could be some difficulties. If the transferor had agreed to pay the tax and, after a period of years while a dispute was going on, decided not to pay, the Revenue would have recourse to the transferee for the tax. Any other transfers of value made in the meantime would suddenly attract a lower rate of tax because the transferor would go down several slices in the table as he would have made a much smaller gift eight years before. The Revenue would then have to reimburse many people who had paid tax at an inflated value because of the change of mind of the transferor.
Will the revenue make those repayments? If so, how long will it take to make repayments of capital transfer tax to those who have overpaid? If we are to make the taxpayer hustle to pay the tax, we ought also to make the Revenue hustle to repay in cases where there has been overpayment. It seems that the interaction of the valuation clauses and the long time that it will take to make valuations in some cases, together with the short time to pay, have not been properly thought out. I hope that the Chief Secretary will have another look at this matter.

Mr. Joel Barnett: I am very hurt by the comments made by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). I think he must be getting tired to describe my hon. Friend and myself in that way. It really is not good enough. Had I been inclined to accept the amendment, I should have been put off a bit by the hon. Gentleman talking to me in that exaggerated way.
The hon. Member for Norfolk, South (Mr. MacGregor), who usually reads his briefs on these matter very well, said that the tax could be payable within three weeks. Under our amendment, the tax could not be payable in less than six months. It is either not less than six or more than 12 months.

Mr. MacGregor: Perhaps I should clarify the situation. I meant to say, if I did not, three weeks after the end of the tax year. I was trying to make the point that it would be much simpler for taxpayers to deal with their tax relating to the past year at the one time. The taxpayer is being asked to pay this tax and to make his assessment within three weeks of the end of the tax year, whereas in all other cases it is much longer.

Mr. Barnett: The hon. Gentleman knows that under our amendment he would have rather longer than that. The taxpayer would have a minimum of six months.
The hon. Member for Cirencester and Tewkesbury gave us an example of a protracted dispute. I hope that the hon. Gentleman is listening. It does not really matter, because he can read it in Hansard. If there is a dispute, the Revenue cannot enforce payment while the first appeal is pending. That is dealt with in Paragraph 21, sub-paragraphs (1) and (2).
I assure the hon. Member for Norfolk, South that the Inland Revenue will always give a reasonable interpretation of these matters, as it does with all taxes. I hope that the hon. Gentleman will agree that the amendment goes a long way to meet the points made in Committee. I hope, therefore, that it will be acceptable to the House.

Amendment agreed to.

Amendments made : No. 797, in page 61, line 19, at end insert :
' (2A) So much of the tax chargeable on the value transferred by a chargeable transfer made within three years or, as the case may be, one year of the death of the transferor as—

(a) exceeds what it would have been had the transferor died more than three years after the transfer ;
(b) is tax for which, by virtue of section 26(2A) of this Act, only a charity or only a political party is liable ;
shall be due six months after the end of the month in which the death occurs '.

No. 148, in page 61, line 20, after '32', insert :
or (conditional exemption for certain buildings, etc. on death)'.

No. 149, in page 61, line 20, after Act ', insert :
or paragraph 2 of Schedule (Relief for woodlands) to this Act '.

No. 496, in page 61, line 21, leave out three ' and insert six '.

No. 787, in page 62, line 37, after ' 4 ', insert 6(2), 12 or 14 '.

No. 801, in page 62, line 46, at end insert :
'(aa) references to the time six months after the end of the month in which that date falls were references to the time when the tax would be due if it were not payable by instalments ;

No. 788, in page 62, line 47, at end insert :
'or, if the transfer is made under paragraph 6, 12 or 14 of Schedule 5 to this Act, to the trustees of the settlement '.

No. 789, in page 63, line 33, after entitled ', insert in possession '.

No. 790, in page 63, line 33, at end insert :
'(except in a case where no individual is so entitled) '.

No. 791, in page 64, line 27, after 4 ', insert 6(2), 12 or 14 '.

No. 802, in page 64, line 35, leave out from to ' to end of line 36 and insert :
' the time six months after the end of the month in which the death occurred were references to the time when the tax would be due if it were not payable by instalments ; and '.

No. 154, in page 64, line 49, at end insert :
' 14A. Tax chargeable on such a chargeable transfer as is mentioned in paragraph 4 of Schedule (Relief for woodlands) to this Act may, if the person paying the tax by notice in writing to the Board so elects, be paid at his option either by eight equal yearly instalments or by sixteen equal half-yearly instalments, of which the first shall be payable six months after the end of the month in which the transfer is made '.

No. 155, in page 65, line 3, at beginning insert (a)'.

No. 156, in page 65, line 5, after 'business ', insert :
'or
(b) is payable by instalments under paragraph 14A above '.

No. 157, in page 65, line 27, leave out (1) ' and insert (1)(a) '.

No. 792, in page 65, line 34, at end insert:
'(5A) The reference in sub-paragraph (5) above to the same transferor includes, in relation to chargeable transfers which are made under paragraph 6, 12 or 14 of Schedule 5 to this Act, the assumed transferor referred to in paragraph 6(4) of that Schedule'.

No 161, in page 66, line 37, after '32(4)', insert:
' or subsection (6) of section (conditional exemption for certain buildings, etc. on death)'.

No. 803, in page 66, line 39, leave out 'any' and insert:


'(a) an amount of tax charged on the value transferred by £ chargeable transfer made after 5th April and before 1st October in 1975 or any later year and otherwise than on death remains unpaid after the end of the period ending with April in the next year ; or
(b) an'.

No. 804, in page 66, line 40, leave out 'a' and insert 'any other'.—[Mr. Joel Barnett.]

Mr. Deputy Speaker: With the permission of the House, I will put the question on the next batch of amendments together—No. 805, No. 162, No. 806 and No.798.

Mr. Nott: I am sorry to interrupt you, Mr. Deputy Speaker, but I must say that this is the most impossible Finance Bill that has ever been presented to the House. Would you be so kind as to ask whether the Government will let us know on which page of the Notice Paper these Government amendments appear so that we can keep pace with what is going on? The Government have tabled hundreds of amendments—[Interruption.] They are on the Notice Paper, but it would greatly convenience the House if the Chief Secretary, when he believes an amendment to be a major one, would let us know on which page of the Notice Paper it appears. When we last debated the Bill the Government had tabled a manuscript amendment only an hour before it was read out and moved by the Government.

Mr. Deputy Speaker: I think that I can help the hon. Gentleman. I will give the page numbers. On page 847—Amendments Nos. 805, 162, 806.

Amendments made: No. 805, in page 66 line 43, leave out ' if ' and insert (c)'.

No. 162, in page 66, line 44, after ' Act ', insert :
' or paragraph 2 of Schedule (Relief of woodlands) to this Act '.

No. 806, in page 66, line 45, leave out ' three ' and insert six '.— [Mr. Joel Barnett.]

Mr. Deputy Speaker: On page 848, Amendment No. 798.

Amendment proposed, No. 798, in page 67, line 3, at end insert:
' (1A) Sub-paragraph (1) above shall apply in relation to tax for which, under section 26(2A) of this Act, only a charity or only a political party is liable, and in relation to such an excess as is mentioned in section 27(3A) of this Act, as if the chargeable transfer had been made on the death of the transferor. '.— (Mr. Joel Barnett.]

Mr. Nott: Perhaps the Government would like to explain a little to us about the amendment. I thought I heard the Chief Secretary saying a few moments ago—I say this with the best of humour—that it should be easy enough to follow these matters. We will be patient with the Chief Secretary. We are in very good humour about this. We will wait. We should like to hear what the amendment is about.

Mr. Joel Barnett: It is exactly as set out on the Notice Paper.

Mr. Deputy Speaker: I hope that the hon. Gentleman is satisfied with that explanation. The Question is—

Mr. Ridley: I am not quite satisfied with the explanation of what the amendment does.

Mr. Joel Barnett: Perhaps I can help the hon. Gentleman. It is possible that the hon. Gentleman has not read all the others. This amendment is consequential upon the others.

Mr. Ridley: I have on a previous occassion had to mimic a Treasury Minister answering a debate on an amendment. I should hate to do that again at this more serious and august stage of the Bill. The Chief Secretary, if he is challenged by my hon. Friend the Member for St. Ives (Mr. Nott) to say what the amendment seeks to do, should be able to do this. He has a very large number of folders on the bench. I notice with horror and consternation that they are bright red. Surely amongst all those papers there is just one piece of paper which will tell the right hon. Gentleman what the amendment seeks to do.

Mr. Joel Barnett: I thought I told the hon. Gentleman. He cannot have been listening. I told him that this amendment was consequential upon Government amendments, which perhaps he had not read, providing reduced rates of tax for lifetime transfers and unlimited exemption for lifetime gifts to charity and to political parties. This is perfectly understandable. If the hon. Gentleman had read the amendment clearly he would have seen that it was consequential upon the others.

Amendment agreed to.

Amendment proposed: No. 165, page 72, line 11, leave out 'he' and 'insert' that other person'.—[Dr. Gilbert.]

9.30 p.m.

Mr. Graham page: May I have an explanation of this amendment? In fact, I think I can probably explain it to the Chief Secretary if he has not got the explanation handy. This is a very import amendment. The right hon. Gentleman may have the explanation in his head. He certainly did not have the last one in his head.
This is a case in which a person is required to inform the Board of Inland Revenue if he happens to know of an error made by any other person. I presume that this is just a matter of drafting. This is one of what we have labeled the snooping provisions. It is most extraordinary. If a piece of paper happens to blow over one's garden wall and one reads it, to discover that someone else has not disclosed something by way of tax, a duty is imposed on the reader of that piece of paper to report the fact to the Board of Inland Revenue, and one suffers a penalty for not doing so.
This is a provision of the utmost width. The public ought to realize what is being done, which the Chief Secretary has said is necessary, because of this entirely new tax imposed on the public. If the Chief Secretary is prepared to give the reason for amending what he first put in the Bill, the House might allow him to have this amendment.

Mr. Joel Barnett: I am surprised at the right hon. Gentleman for getting so excited about these points at this time of night.
This amendment relates to paragraph 30, which deals with the situation where

information furnished to the Revenue for capital transfer tax purposes is afterwards discovered to have been incorrect in some material respect. Subparagraph (1) applies where the person who discovers the error is the same person as supplied the information in the first place. The right hon. Gentleman will recall that we had a little discussion about the interpretation of this paragraph in Committee. In fact, it went on at some length.
Subparagraph (2) deals with the case where the person who discovers the error is a person liable for tax to which the information was relevant but is not himself the one who provided the information in the first place. Those who were present or who have read Hansard will recall that there was some confusion about the interpretation, and I promised to look at it to see whether I could clarify the matter.
The present amendment deals with what was thought to be an ambiguity in subparagraph (2) which has apparently contributed to a misunderstanding of the scope of the provision. I hope the amendment leaves no further misunderstanding of the sort which gave rise to the stuff that we had in Committee, and which the right hon. Gentleman has given us again, about snoopers. I see that he is smiling. He knows it is a lot of rubbish. I hope the amendment will clarify the matter beyond doubt.

Amendment agreed to.

Amendment made: No. 166, in page 75, line 23, at end insert:
'41 A. Section 44(3) of the Finance Act 1950 and section 3(3) of the Finance Act (Northern Ireland) 1951 (certificate of prospective amount of estate duty) shall, notwithstanding their repeal by this Act, have effect with the necessary modifications in relation to tax for which trustees of a settlement may become liable under section 25(6) of this Act'.—[Dr. Gilbert.]

Schedule 5

SETTLED PROPERTY

Amendments made: No. 168, in page 76, line 45, leave out from beginning to
', and' in line 47 and insert:
' In the application of this Schedule to Scotland, any reference to an interest in possession in settled property is a reference to an interest of any kind under a settlement actually being enjoyed by the person in right of that interest'.

No. 169, in page 77, line 20, at end insert:
' (2) In determining whether property comprised in a settlement which became so comprised before 10th December 1974 is excluded property section 43 of this Act shall be disregarded.'

No. 170, in page 77, line 36, at beginning insert :
'The Treasury may from time to time by order made by statutory instrument prescribe a higher and a lower rate for the purposes of this paragraph ; and '

No. 171, in page 77, line 42, leave out from amount ' to but ' in line 3 on page 78, and insert:


'(a) shall, if tax is chargeable by reference to the value of that part, be taken to be not less than it would be if the property pro. duced income at the higher rate so prescribed ; and
(b) shall, if tax is chargeable by reference to the value of the remainder, be taken to be not more than it would be if the property produced income at the lower rate so prescribed ;

No. 172, in page 79, line 7, at end insert :
' (5A) If the interest comes to an end and on the same occasion the settlor's spouse becomes beneficially entitled to the settled property, then if—

(a) the settlor's spouse is then domiciled in the United Kingdom and resident (within the meaning of the Income Tax Acts) in the United Kingdom in the year of assessment in which the interest comes to an end ; and
(b) neither the settlor nor the settlor's spouse had acquired a reversionary interest in the property for a consideration in money or money's worth ; 
tax shall not be chargeable under this paragraph '.

No. 173, in page 79, line 16, leave out ' 26th ' and insert 27th '.

No. 175, in page 79, line 35, at end insert :
' unless the transaction is such that, were the trustees beneficially entitled to the settled property, it would not be a transfer of value '.

No. 179, in page 81, line 6, at end insert :
' unless the transaction is such that, were the trustees beneficially entitled to the settled property, it would not be a transfer of value '.

No. 180, in page 81, line 15, at end insert :
'and the appropriate Table for the purposes of those paragraphs (including the calculation of any tax that would have been chargeable as mentioned in paragraph 7(2)(a) below) is

the Second Table set out in section 35(2) of this Act '.

No. 181, in page 81, line 16, at beginning insert :
' The reference in sub-paragraph 4(a) above to the tax payable on a capital distribution does not include any tax which is payable by a person to whom a distribution payment is made ; and '.

No. 182, in page 81, line 19, at end insert :
'(5A) Notwithstanding sub-paragraph (1) above, a distribution payment which is made to the settlor or the settlor's spouse shall not be a capital distribution if the settlor or, as the case may be, the settlor's spouse is domiciled in the United Kingdom at the time the payment is made and resident (within the meaning of the Income Tax Acts) in the United Kingdom in the year of assessment in which it is made '.

No. 183, in page 81, line 19, at end insert:
'(6) Sub-paragraph (2) above shall not be taken to apply in the case of a person who, on surviving another person for a specified period, becomes entitled to an interest in possession as from the other person's death '.

No. 184, page 81, line 19, at end insert :
' (7) Where a person entitled to an interest in possession in part of the property comprised in a settlement became so entitled as a member of a class, sub-paragraph (2) above shall not apply on his becoming entitled, as such a member, to an interest in possession in another part of that property, if he becomes so entitled on the death under full age of another member of that class.'

No. 185, in page 82, line 8, leave out 26th ' and insert 27th '.

No. 187, in page 82, line 18, leave out 25th ' and insert 26th '.

No. 189, in page 83, line 13, leave out 25th and insert 26th '.

No. 191, in page 83, line 40, after for ', insert paragraph 17B(2) below or '

No. 192, in page 83, line 42, leave out 26th ' and insert 27th '.

No. 194, in page 83, line 47, after for ' insert paragraph 17B(2) below or '.

No. 195, in page 84, line 37, at end insert :
'or, if the following conditions are satisfied, an interest in possession to which a company is beneficially entitled, the conditions being—

(a) that the business of the company consists wholly or mainly in the acquisition of interests in settled property ; and
(b) that the company has acquired the interest for full consideration in money or


money's worth from an individual who was beneficially entitled to the interest '.—[Dr. Gilbert.]

Dr. Gilbert: I beg to move Amendment No. 196, in page 85, line 43, leave out ' January 1976' and insert ' April 1980 '.

Mr. Speaker: With this it will be convenient to take the following amendments:

No. 197, in page 86, line 8, leave out ' twenty ' and insert ' forty '.

No. 430, in page 86, line 8, leave out ' twenty ' and insert ' fifty '.

No. 198, page 86, line 15, and the sub-amendments thereto.

No. 609, in page 87, line 3, at end insert :
' (5) For the purposes of this paragraph it shall be assumed that a beneficiary will become entitled to, or to an interest in possession in, settled property on or before attaining the age of 25 years if such is the effect of the trusts of the settlement for the time being in force notwithstanding that those trusts may be altered by the exercise of a power of appointment or otherwise'.

Dr. Gilbert: We have material here for a fairly long debate, and I do not know how long hon. Members wish to take on this group of amendments. However, I ought to report to the House a matter which I have already communicated to the hon. and learned Member for Dover and Deal (Mr. Rees), arising from a question which he raised in Standing Committee. The passage is to be found at cols. 1966–7 of the Official Report of 17th February.
The hon. and learned Gentleman asked what would need to be the date of the relevant transfer to give rise to a charge to tax some time during the coming year, 1976. It seemed to us at that time that the wording of the question was not precise, but in retrospect I think that it is clear enough from the context that the information which the hon. and learned Gentleman was seeking was in answer to this question: which trusts with nonresident trustees will be unaffected by the postponement of the first relevant anniversary for the periodic charge—and will these have to pay the annual charge in the calendar year 1976—and which will have payment of their first annual charge deferred?
I hope that I have construed the hon. and learned Gentleman's question correctly. I see that I have, and I am grateful for his acknowledgement.
The full answer is that the annual charge would be payable in the calendar year 1976 if the relevant transfer arose in the period between 1st April 1970 and 31st December 1975, or at appropriate dates at 10-year intervals before those dates. There would be no annual charge in the calendar year 1976 where the relevant transfer was in the period between 31st December 1965 and 31st March 1970, or, again, at appropriate dates in the previous decades.
The effect of this is that the postponement of the date of the first relevant anniversary for the periodic charge will defer the date on which the annual charge becomes payable for trusts which would have had an anniversary date of 1st January 1976 to 31st March 1980, but will not give rise to a deferment of the first annual charge for trusts with anniversary dates from 1st April in year zero of the decade to 31st December in year 5 of the decade.
I apologise if I inadvertently misled the Committee. It is a rather technical point, and I hope that what I have just said will clarify the matter.

Mr. Peter Rees: I am sure that I speak for the whole House when I say that we are grateful for the Financial Secretary's pellucid statement, which will, no doubt, give wide satisfaction and clarification both within and outside the House.
We now approach Schedule 5, which deals with the whole web of fiduciary relationships and interests under settlements. With a great economy of verbiage, we disposed of the whole of Schedule 5 in Standing Committee between four o'clock one afternoon and half-past eight the next morning. I do not think that even the hon. Member for Luton, West (Mr. Sedgemore), whose imagination is sometimes a little feverish—if I may say that in his absence, though I am sure that his hon. Friends the Members for Keighley (Mr. Cryer) and for Bolsover (Mr. Skinner) will defend his reputation, honour and interest should I unwittingly trench upon them—will complain that on that occasion and on those matters the Opposition were filibustering.
The measure of the complexity of this schedule is evidenced by the fact that on between 20 and 30 points which we drew to the attention of Treasury Ministers the Financial Secretary, with his customary urbanity and insight in these detailed matters, agreed to take the matter away for further thought. Some of those points have come back, but a great number have not.
Some hon. Members, mainly to be found on the Government benches, would say that in our society in the latter half of the twentieth century there is no place for settlements—that fiduciary relation. ships and interests under trusts are outworn trappings of a feudal age. I hope that I have picked the right phraseology, though it is not phraseology with which I have much sympathy, for the fact is that most settlements were devised long after the end of the feudal era.
I have no doubt that there are hon. Members on the Labour benches—perhaps even the hon. Member for Keighley (Mr. Cryer), to whom I judge that I am not doing an injustice, having heard his interventions—who would think that this whole question could have been disposed of by a one-clause Bill which merely said that henceforth all property should be vested in the State. There might have to he a complicated schedule dealing with the administrative arrangements, but I have no doubt that the hon. Gentleman and the Financial Secretary would be well capable of exposing and expounding the complexities of such a schedule. I do not believe that such a Bill would commend itself to the country. We are entitled to ask what the Chancellor's long-term objectives might be, and this is an appropriate point at which to ask that question.

Mr. Robert Adley: I do not wish to steal my hon. and learned Friend's thunder, for which he has become rightly famous in the last few days. While he is putting that question to the Chancellor, however, will he consider whether the right hon. Gentleman should now or at some time tell us just how far his former membership of the Communist Party influences his thinking in these matters.

Mr. Rees: It was perceptive of my hon. Friend to have raised that question, because it is right that the country should know the cast of mind of those who

preside over its destiny. I do not think any of us is impugning the loyalty or good faith of the Chancellor, and if I were to seek to do so I am sure that you would call me sharply to order, Mr. Speaker, and I would be the last to want to expose myself to your rebuke. We are, however, entitled to ask about and analyse the thought processes of those who take major decisions on our behalf. This is a point upon which I shall hope to touch further in my brief intervention.

Mr. Dennis Skinner: Like the hon. Member for Epping Forest (Mr. Biggs-Davison)?

Mr. Rees: The hon. Member for Bolsover (Mr. Skinner) is quite entitled to probe and lay bare our innermost thoughts, aspirations and ambitions. We must leave the country to judge how far we are doing it justice in what we are seeking to achieve. The hon. Member has made a comment about one of my hon. Friends, and I believe that my hon. Friend can look after himself, but the comment is not particularly germane to the points I wish to raise about the schedule. No doubt if the hon. Member catches your eye, Mr. Speaker, he will be able to explore the question he raises.
I recall to the House that in his period as Secretary of State for Defence the Chancellor committed us to seven defence reviews, and he is therefore well versed in what are colloquially called "salami tactics ". It may be that we are gradually approaching the situation of the one-clause Bill, where all property is to he vested in the State. We have not quite reached that position in this Bill, but we are entitled to judge the Bill against that background.
I recall—because, Mr. Speaker, possibly like you, I read my copy of The Times this morning—that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) detected as one of the Chancellor's prime political qualities a "brutal cleverness ". Of course it always takes a candid friend to expose us for what we are to the audience of the country. It may be that a brutal cleverness is what Mr. Shelepin required to carry him to the head of the KGB, but I wonder whether that is the quality which the country requires of its Chancellor of the Exchequer.
I shall leave the right hon. Member for Sparkbrook to explore that point, because it was he who made it. It is unfortunate that I should have to discuss the Chancellor in his absence, but since he is nominally piloting the Bill through the House, no doubt my remarks will be retailed to him and no doubt, as on Thursday, he will come in very quickly if he feels that his honour and motives have been impugned. That, of course, is far from my intention this evening, as it was on Thursday.
9.45 p.m.
It was a Government pronouncement that settled property was not to be treated any more harshly than property held by an individual absolutely and beneficially. That would be a very correct proposition. Indeed, as one ploughs deeper into the Bill—I use the word "ploughs" advisedly, because one has to plough very deeply to get its inwardness at times —one realises what discrimination there has been against those who have an interest in a settlement against property held by trustees. One asks oneself why this should be. It would not be putting it too highly to say that over a generation this tax will kill off settlements.
I would only remind the House of that poignant line in the Ballad of Reading Gaol :
 Yet each man kills the thing he loves ".
There we have it : obviously the Chancellor really loves settlements. He has the heart of a Chancery lawyer ; not the head. His heart is in Lincoln's Inn, but his head, steeped in the subtleties of dialectical materialism, rests in Highgate Cemetery, alongside Karl Marx.
I hope that I have not taken too much of the time of the House with a few general observations, but it is right that we should view this provision in its broad context and in its setting against the whole background of this odious tax. I now come to one or two technical matters. Technical, I describe them, but their impact is brutal. Knowing the Financial Secretary's warm heart and the sensitive way in which he responded to our overtures in Committee, and his keen interest in the technicalities of the Bill, I should like to put them to him.
First, he will recall that in Committee I raised what I called, in a kind of legal

shorthand the commorientes. This is the case, often encountered in practice, of a person leaving property to, say, his widow if she survives him for a month. It is the kind of case where both are involved in, say, a motor accident and, under the presumptions of the law, the younger is presumed to have survived, if for only a fraction of time, the death of the other. The words often used are: "I leave to my widow, if she should survive me by one month, my property ".
Under the Bill as originally drawn that would have involved two charges to the capital transfer tax, one on the death of the husband and a second on the death of the wife. The Financial Secretary saw the force of the objections from our side of the Committee to that arrangement, and I notice that in response to our overtures he has put down Amendment No. 183.
I ask him to have a further look at that amendment, because, although I recognise his warmth of heart, I am not absolutely confident that he has grasped the technical details. I hate to accelerate the pace of the debate, because I should like to give the Financial Secretary time to receive the timely support and sustenance that he always receives from the Official Box in the course of our debates on these technical matters. I pay tribute to the ready and speedy way in which slips of paper come down like confetti on the devoted head of the Financial Secretary. On this occasion more than one piece of paper may have to be passed to him.
I ask him to look again at Amendment No. 183, because it seems to proceed on the premise that interest given to the survivor at the expiration of the specified period relates to the date of death. That may be so in some cases, but it is not true in all. He has an interest contingent upon his surviving for a specified period, and the interest, even if survivorship takes place, does not relate back to the date of death. Amendment No. 183 will not achieve the purpose which I hope the Financial Secretary intends and which was very much in my mind when I drew his attention to this point during our epic debates on that long night.
The second point, which is again of a slightly technical nature, relates to class gifts, and this again I raised in Committee, and again I assume, in response to


our overtures, the Financial Secretary has put down Amendment No. 184. I am sorry that the point is of such a technical nature that the hon. Member for Bolsover should lose his appetite for our debates.

Mr. Dennis Skinner: Not yet.

Mr. Rees: We shall welcome his intervention later.
It is true that the Financial Secretary has covered the case where there is a possible charge when a member of a class dies so that his interest passes to the surviving members of the class, but what happens when someone is born after a person has achieved an interest in a trust fund, but only a defeasible interest, so that in part his interest is defeated by a subsequent birth? If the Financial Secretary is prepared to cover the one point he should be prepared to cover the other, and I hope that he will look again at Amendment No. 184.
I am conscious that I am going into the schedule in a certain amount of depth—

Mr. Speaker: Order. I am getting a little troubled. I thought that the House had passed Amendment No. 184.

Dr. Gilbert: And Amendment No. 183.

Mr. Speaker: I do not think that we can job back to that extent.

Mr. Rees: I am grateful for your guidance Mr. Speaker, but I am not seeking to go back. I am merely pointing out that the amendments have not completely covered the points put to the Financial Secretary in Committee, and I have no doubt that he will wish to advance from Amendments Nos. 183 and 184. The point I am making is relevant, because, unless we get some assurance from the Financial Secretary on this matter, many people will be disposed to alter their settlement and take advantage of the amendment which we are debating even though a penalty is imposed. But if some kind of assurance were forthcoming that would not be necessary. I hope that on that basis, Mr. Speaker, you will regard me as being within order.
Then I come to maintenance and accumulation settlements. These are very

much within the scope of the Government amendment, because unless they are covered by paragraph 14 they are settlements which are treated as not having an interest in possession, and if that is so they are subject to this swingeing periodic charge which bears particularly hardly on settled property.
As I said in Committee, most maintenance and accumulation settlements are subject to some overriding power of appointment, so it cannot be said that a person on achieving a specified age will achieve a vested interest in possession. I say that he may achieve it. The Financial Secretary does not seem to have taken that point on board, because he has not cured that difficulty. Indeed, there is another provision which may vitiate the whole point of Amendment No. 609 and may deprive any maintenance and accumulation settlement of any relief. I hope that the Financial Secretary will address himself to this.
The Financal Secretary, with his deep knowledge of this matter, will recall Section 32 of the Trustee Act, which allows trustees to advance part of a settled property in favour of persons who may not have an immediate interest in possession. They can override the life interest only with the consent of the life tenant.
Let us assume a case in which a person is given an interest contingent on his attaining the age of 25. Between 18 and 25 he could consent to appointment in advance by the trustees under Section 32 which would override his interest. In that kind of case it could not be said with certainty that the beneficiary would obtain a vested interest. The Financial Secretary has not chosen to deal with that. Unless he does, it means that the relief given by Schedule 5 will be practically valueless. I hope that the Financial Secretary will look once again at that point.
Next I come to the question of the assignment by a life tenant of his interest for value. Owing to a peculiarly unfortunate definition of an interest in possession, if a life tenant, an individual, had assigned his life interest to a reversionary company or an institution under the Bill as originally drawn that would not have counted as an interested possession and there would have been a periodic charge.
Again, the Government have partially responded to the arguments we put forward in Committee, but only where an interest has been assigned to a company whose main business it is to acquire reversionary interests. That is a very narrow range of companies. I call to mind only two or three which embark wholly or mainly on that type of business. A great number of life tenants assign their life interests to institutions or insurance companies. They will be excluded from the relief afforded by the amendment. Again, I ask the Financial Secretary—knowing the sympathetic way in which he views these matters which we have turned up in an unpartisan spirit—to give us some assurances on that matter. I recognise that at this late stage in the debates it may be impossible for him to give more than a verbal assurance. But we have the exhilarating prospect that within a matter of weeks we shall be coming back to these matters and it would foreshorten our debates if the Financial Secretary would give us some generous assurances now.
Finally on my technical points, I come to the position of settlements in foreign resident trustees. One of the harshest and least-thought-out provisions is the one that seeks to saddle a settlor with the liability for the periodic charge that may arise in that situation. There must be numberless cases in which a settlor who set up his settlements when he was domiciled and resident abroad comes to these shores, whether for a job or another purpose and divests himself of the settlement which he has set up in foreign resident trustees. Apparently, he is to be saddled with the liability for the periodic charge on that settlement. He may have completely divested himself of that property and have no resources to meet that charge. I cannot believe that the Financial Secretary wants to achieve that, and I hope that lie will go back to that point.
I come now to Amendments Nos. 196 and 198, which are in response to overtures in Committee and are designed to permit people to rearrange their settlements so that they are no longer discretionary settlements where there is not an interest in possession designed to permit them to appoint life interests or absolute interests and there would not

be this swingeing periodical charge. I am glad that the Financial Secretary realised how harsh the position might be, but the remedial amendments he seeks to introduce do not go nearly far enough. If discretionary settlements are socially undesirable, instead of some residual penalty as there is under Amendments Nos. 196 and 198 there should be positive encouragement. Why is there any charge at all? Why should not the trustees be entitled to appoint out of discretionary settlements an absolute or life interest without any penalty whatever?
10.0 p.m.
We drew the Financial Secretary's attention to the difficulty of piloting through the Chancery Division the many appointments and variations that might be necessary. He took that point on board and we are grateful. I point out that in the original White Paper, which has been subject to the closest scrutiny, like the texts of the early Fathers, there was absolutely no mention of the likelihood that there would be any charge if an interest in possession was created out of a settlement where there was no interest in possession. In reliance on that I am informed by people outside who are conversant with these matters that many appointments were made last year. Is it fair that those appointments should be retrospectively saddled with a measure of capital transfer tax?
For the future, people are on notice. They will have to make a calculation as to whether it is right to pay the penalty which the Financial Secretary seeks to exact or whether they should leave their settlements in their existing form and pay the periodic charge. I believe that these amendments, although right in principle, are shot through with a touch of meanness which has characterised this Bill throughout.
The capital transfer tax has been justified on many occassions by many Government spokesmen in these terms. They suggest that it is only perfecting the estate duty introduced by Sir William Harcourt in 1894. They say that estate duty was an avoidable tax and, as though they were carrying on the great work of that notable Liberal Chancellor, they are deciding to plug the loopholes, which, had he envisaged them, he would undobtedly have done 80 years ago.
There is apparently a virtue in repetition. I have heard the same theme from the Chancellor, the Chief Secretary and the Financial Secretary. I have even heard a noble Lord sing this theme. This is obviously the hard selling line. I tell the Chancellor and his colleagues that the mere assertion of something that is quite inaccurate does not make it true. I have searched the debates of 1894 in vain for any suggestion that Sir William Harcourt intended to impose a tax on lifetime transfers.
Anyone conversant with the 1894 Finance Act will notice that there was to be only one charge on settlements—when they were set up—and that they were to be free from charges thereafter. This tax involves an entirely novel departure. It is a travesty of language to say that the old estate duty should have been put right because there were so many loopholes in it. It was never designed

to catch lifetime gifts. If it were, no doubt, three, if not four, Labour Governments who were charged with the administration of the tax would have put it right.
I cannot believe that the Chancellor, whom we know from our exchanges to be, underneath his gruff exterior, a man of exquisite sensitivity, really believes that the epitaph on his tomb should be :
 As Chancellor of the Exchequer he used his considerable powers to extract howls of anguish from his compatriots.
I do not believe that is how he would like to be remembered by his sorrowing countrymen. There is always time for a death bed repentance. We shall not think the less of him if he comes in sackcloth and ashes and attends, for a moment, our debates on Schedule 5. He can emphasise his sensitivity, perhaps even his change of heart, by accepting our amendment.

Dr. Gilbert: It is difficult to debate a group of amendments when most of the discussion on them has taken place on provisions which have already been passed by the House. However, I shall attempt to cast my mind back to some of the points raised by the hon. and learned Member for Dover and Deal (Mr. Rees). I think that it is right to comment briefly on some of his more general animadversions on our attitudes to trusts.
The Government have no bias against settled property, and indeed we have no bias against discretionary settlements. My colleagues and I made that clear time after time in Standing Committee. We made clear that discretionary settlements in many cases are a beneficial social instrument.

Mr. Cormack: The light has dawned.

Dr. Gilbert: If the hon. Member for Staffordshire, South-West (Mr. Cormack) had been in the Standing Committee, he would have known that I said that time after time. Therefore, there is an excuse for the hon. Gentleman. However, there is no excuse for the hon. and learned Member for Dover and Deal who obviously in Standing Committee was not listening. However, he could have read what I said afterwards.
We made it clear that we constructed this tax without any prejudice whatever against discretionary settlements. We recognise that in a great many circumstances they can be useful social instruments. We have never made it part of our case that discretionary settlements were set up primarily or exclusively for tax avoidance purposes. We have said that we see no reason to continue the incredible tax privileges enjoyed by discretionary settlements.
The hon. and learned Gentleman appeared to suggest that if the result is to be an end to discretionary settlements it must follow that the vast majority of discretionary settlements have been set up for tax reasons. I do not accept that argument. I am not nearly so pessimistic about the future of discretionary as is the hon. and learned Gentleman. But all we have tried to do is to create a regime by which, as a result of the operation of the periodic charge, there will be, once every

30 years or so, the equivalent of a charge when free property is transferred from one generation to another. We have therefore made provision for offsets where chargeable occasions have arisen from discretionary trusts backwards to the two previous periodic charges. Such matters are subject to the amendments within this group but, as the hon. and learned Gentleman did not refer to them, I take it that he considers them to be of minor importance.
I was asked how far Government Amendment No. 183 went. That amendment covers a situation where a testator gives his estate to a beneficiary. If that beneficiary survives for a certain period, as is commonly found in wills, that period of survival may be as short as seven days, but is commonly of the order of one month. The exact effect of the provision will depend on the words used. But in general terms there is no interest in possession created until that period which has been laid down in the will has expired. The result is that a tax charge would arise under paragraph 6(2) of the Schedule. It would be excessive to retain this charge in addition to the normal tax charge on the testator's estate on his death. Our amendment No. 183 was tabled to remove it.
Our amendment also covers a situation in which the testator gives his estate to a beneficiary if he survives for, say, a month, when the gift takes effect at the end of the period. The gift includes any income for that period. Therefore, the beneficiary can then be regarded as having an interest in possession from the death of the testator.

Mr. Peter Rees: I do not think that the hon. Gentleman has entirely grasped the point I was making, in that in most clauses of that kind the survivor does not become entitled to an interest in possession as from the other person's death. He becomes entitled as from the end of the specified period—not in every case, but in most cases. I should be grateful if the hon. Gentleman would address his mind to that point.

Dr. Gilbert: I am not sure that I agree with the hon. and learned Gentleman. Is he saying that it would normally be from a specified date or !from the death of the


testator? As I understand it, most settlements are drawn in respect to a given period after the death of the testator.

Mr. Peter Rees: The point is one of some legal subtlety. Perhaps the hon. Gentleman will wish to have assistance from one of the Law Officers. In most such cases that I have seen, the interest toes effect only from the end of the specified period for which the person must survive. The survivor takes his interest not retrospectively from the death but from the end of the period. I hope that I make the position absolutely clear. Perhaps the hon. Gentleman would care to take advice so that the House may be enlightened by a Law Officer.

Dr. Gilbert: I certainly take the hon. and learned Gentleman's point on board. I think that what I have said covers the vast majority of cases, as I think the hon. and learned Gentleman was good enough to acknowledge.
I now turn to Amendment No. 184. I said in Committee, as reported at col. 1754 of the Official Report of our Committee proceedings, that where a class of beneficiaries had been enlarged with the birth of a child into the class there should be no further charge when that child died under the age of majority and thus produced an increase in the income to which another member of the class would be entitled. Our amendment covers that situation and goes rather further, because its operation is not restricted to the death of a child whose birth may enlarge the class. It will apply to the death under the age of majority of any member of the class who increases the share of another member. I hope that that relates to the hon. and learned Gentleman's point.

Mr. Peter Rees: I apologise for constantly interrupting the hon. Gentleman. I obviously did not put my point with sufficient clarity. I recognise that that situation is covered by Government Amendment No. 184. What I was saying was that a person's interest could be partially or even wholly defeated by the birth of another member, by an addition to the class by birth, rather than a contraction by death. As I understand the tax, that could give rise to a charge to duty. It does not seem to me

that that matter has been covered by the amendment.

Dr. Gilbert: I take the hon. and learned Gentleman's point that where there is an increase in the number of individuals in a class there will be a chargeable transfer. I do not think that I gave any undertaking in Committee, that such a situation would be exempt as a chargeable transfer. I shall check what I said, but my recollection is that I recognised all along that there could be an anomalous situation in which a charge. able occasion was created by the birth of a child who subsequently died, so that one ended up with the same number of individuals, or maybe an identical group, who had been beneficiaries. Without the amendment, there could be two chargeable occasions. I recognised that that situation, I think without any prodding from the hon. and learned Gentleman on that occasion, was not appropriate to a second charge.
10.15 p.m.
I do not recall on any occasion giving an undertaking of the sort that has been suggested. Normally the addition of another individual to a class gives rise to a charge. However, as the hon. and learned Gentleman presses me, I shall look at my words again. I am fairly clear in my own mind that I was not, subject to correction, giving an assurance of the sort that he believed I was giving.
The hon. and learned Gentleman asked me some questions in general about why we should have any charge on the distributions out of discretionary settlements. He was talking about Amendments Nos. 196 and 198. The answer is fairly clear. I am sure that the hon. and learned Gentleman appreciates the point. It was made many times in Standing Committee. It is not a point on which I am optimistic of convincing him any more than he would be optimistic of convincing me. When a discretionary settlement is terminated by the creation of an interest in possession or where there is a capital distribution out of a discretionary settlement there has clearly been a change in the ownership of the property and there has been a chargeable transfer. In our view that is a properly chargeable occasion.
The hon. and learned Gentleman talked about arrangements having been made last year. I think that my right hon.


Friend the Chancellor made it clear in his Budget statement last March that there was to be a drastic overhaul of the tax treatment of discretionary settlements. Anyone who was so ill-advised—I do not expect that any of the hon. and learned Gentleman's clients were ill-advised—as to alter their affairs to create an interest in possession without waiting to see the terms of the Bill would have been placed in an unfortunate position. As always, we can only regret that people have been badly advised.
The hon. and learned Gentleman asked about foreign resident trustees. He asked why we had annual charges or periodic charges for dealing with situations in which the trustees were nonresident. This matter was debated at great length in Standing Committee. In Clause 25 we have already met the point about the need to ensure that where there are two settlors in relation to a settlement the property should be apportioned between them. It is our view that it must be recognised that if the trustees are nonresident they may be unwilling to pay the periodic charge. For that reason we think it only reasonable to have an annual charge which will be offset against the 10-year charge, as that is a payment in advance. For that reason we consider it only reasonable that the settlors should be liable if the trustees do not pay the tax. That may not be agreeable to the hon. and learned Gentleman but that is why we have these provisions in the Bill.

Mr. Lawson: I did not intend to intervene in this debate, but I feel obliged to do so after having heard what has been said. I shall try to make my remarks brief. I feel that we are in danger of losing sight of the wood for the trees. This is not a matter of petty detail but a question of principle. Paragraph 17 of the White Paper has been referred to and it is necessary to refer to it again. In the White Paper the Government stated clearly the broad principle to be applied to a settled property. Paragraph 17 reads :
in general the charge to tax should be neither greater nor smaller than on the charge to property held absolutely.
The Government have gone back on that and introduced, as regards discretionary trusts, through the working of the periodic charge treatment far more severe than

is applied to property holding beneficiaries and many other kinds of trusts.
The discretionary trust serves a very valuable purpose. I was glad to hear the Financial Secretary concede that tonight, as he did in Committee. The discretionary trust is of great importance to business and to many families, and it has a worthwhile social purpose. However, it was singled out for such harsh treatment by the Government that they were obliged in Committee to move an amendment allowing people to unwind their discretionary trusts, at a price—a small price in the first year, increasing in later years—and to rearrange their affairs.
What justification can there be for this discrimination against the discretionary trust? If the Government feel obliged to allow people to unwind, why are they charging them a fee to do so? Why should not they be able to rearrange their affairs at no charge? Why should they even have to pay 10 per cent. of the charge? It is monstrous.
Then there is the argument about the "periodicity" of the periodic charge. It is no good saying that it is assumed that the capital in the trust has been transferred notionally once every 30 years. There is no reason to suppose that a business beneficially owned would be transferred within a 30-year period. It could easily miss a generation, going from the grandparents to the grandchildren. In any event, the period during which it is held will be more than 30 years, because, even under this Government, the average life span is more than 30 years.
Then there are the employees' trusts. This relates to Government Amendments Nos. 204, 206 and 207 to this schedule. Why have the Government seen fit to charge capital transfer tax to money which is put into employees' trusts? It seems monstrous, and it demands an explanation.
Finally, we have the newspaper trusts. We heard a lot about this matter in Committee upstairs. The Government have still brought forward no amendment. I believe that they have given an undertaking outside this House to certain newspapers which will be gravely affected by the capital transfer tax. The Guardian and Scott Trust is one. The Government have said apparently that


they will see them right, that they are having drafting difficulties, but that something will be brought forward in due course, perhaps in the next Finance Bill. But the Government should tell us. We want to know what the Government intend to do about this very important matter of the newspaper trusts.

Mr. Graham Page: The Financial Secretary omitted to deal with Amendment No. 609. This concerns the paragraph about trusts for the maintenance of children and the very beneficial paragraph which allows the maintenance to go to the children without charge to capital transfer tax.
My hon. and learned Friend the Member for Dover and Deal (Mr. Rees) pointed out how, in the early part of the paragraph, it was said that these benefits applied only if the trust was for a person of a specified age not exceeding 25 years. As my hon. and learned Friend also pointed out, in very many cases of these trusts there is a power of appointment by which an age may be changed.
The purpose of Amendment No. 609 is to make certain that trusts for accumulation and maintenance of children should apply even if there is that power of appointment. It merely deals with the fact that in the early stages the age has to be specified. In many cases it may be altered by the terms of the trusts. But in principle, even if the trusts contain that power to alter by appointment, the benefit should still apply.

Mr. David Howell: We have many other important debates to cover in the pathetically little time left to us, so I shall be brief on this admittedly complicated subject. I think that my right hon. and hon. Friends have said enough to point to the basic dispute with the Government on this matter.
For the benefit of those who did not follow the jungle of complexities in this matter in Committee, I should explain that the Government intend to impose upon discretionary trusts a kind of wealth tax, a periodic levy, which is a curious animal unrelated to the rest of the capital transfer tax. The Government intend to do that because they believe, as they have often said, that discretionary trusts are for the most part tax avoidance devices, although the Financial Secretary earlier said that he regarded them in some cases as beneficial

social instruments. I do not know whether that was to assuage our feelings on the matter or whether he has changed his view. However, it was a slightly different tune from the one that we heard before.
As the Government gradually realised what they had done and as it dawned on them that there were many hundreds of discretionary trusts which had nothing to do with avoidance, what I might call their sporting instinct came to the top and they decided to give discretionary trusts a chance to escape. However, it was not a very good chance. For those who feel strongly about field sports, I think that this would be regarded as the cruel rather than the sporting side because, as soon as the gate is lifted, it is almost immediately lowered through the rising scale of percentage of the total tax set out in Government Amendment No. 198.
We think that this manipulation, this sliding guillotine which falls slowly until it finally chops off any capital distribution from the discretionary trusts in 1980, is an unnecessary and absurd piece of proposed legislation.
We cannot see why it is necessary to have even the 10 per cent. rate, as we argued in Committee, or the 12½ per cent. rate after 31st March 1976. Would it not be a less cruel form of field sport to allow a moratorium during which discretionary trusts could be rearranged?
The Government's answer will no doubt be "We could not do that because, although we are pretending to let them escape, we know that they are really tax avoidance devices and we want them all in the net."
That is not so. The truth is that trusts of this kind have been made in this country since the time of Napoleon. There are old trusts, new trusts, trusts for pensioners, trusts for benevolent purposes, trusts for former elderly employees—trusts for all kinds of employee arrangements—which appear not to be eased by the Government's other amendments which I believe are to be taken formally after we have discussed this group to do with employee arrangements.
To summarise our feelings on the matter, we believe that the Government have designated all discretionary trusts as avoidance devices. Many forms of trusts which were formed long before and since


the estate duty legislation of 1894 for protective and other purposes are not avoidance devices but, in the excellent words of the Financial Secretary, benevolent social instruments.
We cannot see what motive the Government have unless it is the cruel sporting one of insisting on this rising rate of tax on discretionary trusts until they come back fully into the net of the capital transfer tax after 1980.
In most instances this will be a postponement of the difficulties. In Committee upstairs we discussed the problems of the shipping industry, which, by its very nature, has a large unquoted sector held in discretionary trusts. This proposal will not solve the shipping industry's problem ; it will postpone it. It will make sure that unquoted British shipping will be sold off after 1980 rather than immediately. That is of hardly any benefit to anyone.
The Financial Secretary did not tackle the maintenance and accumulation settlement point which was put to him. Indeed, the hon. Gentleman did not answer the point made by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) about the assignment of life interests to insurance companies. He left totally unsatisfactorily dealt with the whole question of why the Government want to place this rising percentage charge on discretionary trusts.
I advise my hon. Friends to look at the nonsensical and unhelpful Amendment No. 198, and to recognise that it would be greatly improved if we were to add our Amendment (h) to it, and I strongly advise my right hon. Friend and hon. Friends to press that amendment to a Division.

10.30 p.m.

Dr. Gilbert: I will not detain the Committee long, as I know that the hon. Member for Guildford (Mr. Howell) wishes to move on to other debates. However, I must say a couple of things to the hon. Gentleman. It would make for the more expeditious transaction of our business if one set of his hon. Friends were not trying to get us to debate amendments which have already been passed and another of his hon. Friends did not start debating amendments we

had not yet reached. However, be that as it may.
The next point which needs to be made is that my right hon. Friend and I are used to having our words misrepresented, but normally even the hon. Member for Guildford allows more than 10 minutes to pass before he tries to put words into my mouth which only a few minutes earlier I had been making clear were not the case. He has just said that we regarded all trusts, and discretionary settlements in particular, as tax avoidance devices. It could not have been more than five or six minutes ago that I was saying precisely the reverse. I do not know how many more times I have to say it—[Interruption]. By all means ; if the hon. Gentleman wants a further exposition of our philosophy in this matter. I shall be very happy to give it to him, I thought that hon. Members opposite wanted to pass on to other things. I am the last to want to draw out time at this stage of the debate, but hon. Members opposite must not tempt me too much, because the time has passed for turning the other cheek to many of the allegations which have been made.

Mr. Tony Newton: I hesitate to interrupt the tremendous flow which the Financial Secretary is now generating, but has it not occurred to him that the more he emphasises the lack of hostility to discretionary trusts the stronger grows the case of my hon. Friend the Member for Guildford (Mr. Howell) for a moratorium instead of a charge?

Dr. Gilbert: We made it quite clear many times in Standing Committee that we thought that a modest charge on an ascending scale was appropriate if only as an incentive to deal with the problems likely to arise in the courts with the conversions which might be expected of many discretionary settlements into other types of trust.
I am sure that it will be within the recollection of the hon. Member for Braintree (Mr. Newton), who distinguished himself in Standing Committee by the moderation of his comments, that the criticism that my right hon. Friend and I were attracting on the question—[Interruption]. There were some hon. Gentlemen in Standing Committee who made some very constructive suggestions


many times over. The hon. Member for Braintree was certainly one of them. I am the first to acknowledge that. However, it will be within his recollection that the accusation against us in Standing Committee was that the charge was so small that it was not worth collecting, which is rather different from the complaint being made by others of his hon. Friends this evening.

Mr. Nott: Perhaps the Financial Secretary will explain to me, because I was not on the Standing Committee, how, when the penalty escalates from 10 per cent. to 20 per cent. over the years, this will help the courts. Surely if the penalty increases it is more likely to push the thing into the early period rather than into the later period.

Dr. Gilbert: Precisely so. The hon. Gentleman makes my point. I agree entirely. The intention was to push settlements into the early period, if possible, to give those concerned an incentive to go before the courts rather than to wait for the last possible moment, which would be the case if there were no charge. That is precisely the point. The point is not directed to the court, but to create a modest incentive to people who might be considering whether to convert to do it as early as possible because there will be a gradually increasing disincentive to do it later. That was the purpose, and I. am glad that I have the hon. Gentleman's assent to that point.
The hon. Member for Blaby (Mr. Lawson) raised the question of newspaper trusts. I said in Standing Committee, as reported in column 2010, that it would take some time to find a satisfactory formulation to give effect to our intention, and that it might be necessary to discuss the problems involved with those concerned. It was, therefore, not possible to introduce this provision in this Finance Bill. I added that there was no great urgency to introduce the legislation because it would be a considerable time before any newspaper trust would have to pay capital transfer tax following our announcement that the

Transitional relief for settlements made before 27th March 1974



13A.—(1) In relation to a settlement made before 27th March 1974 paragraphs 6 to 12 above shall apply with the following modifications.


5
(2) Subject to sub-paragraphs (3) to (5) below, the rate at which tax is chargeable on 5 any capital distribution made before 1st April 1980 out of property comprised in the

periodic charge would be deferred until 31st March 1980.

Employee trusts fall to be discussed under Government Amendments Nos. 204, 206 and 207.

I repeat what I said at the beginning of these remarks, that we have needed no bullying from hon. Members opposite or instruction from them about the value of discretionary trusts. It has always been clear to my right hon. Friend and myself that they were valuable interests. I never said that they were set up principally or exclusively for tax avoidance purposes.

Mr. Graham Page: It seems to me that the hon. Gentleman is coming to the end of his peroration, and he has not dealt with Amendment No. 609.

Dr. Gilbert: I apologise to the right hon. Gentleman for not dealing with Amendment No. 609. I shall do so in a moment. We have always made it clear that our sole purpose was to treat property passing through a discretionary trust on much the same basis as we would have done as between generations. It would have been free property.
The right hon. Member for Crosby (Mr. Graham Page) asked me to turn to Amendment No. 609. This is in identical terms with Amendment No. 323 tabled in Committee. In our view, this amendment would leave the way wide open for any discretionary settlement to have a period of immunity from the periodic charge as long as the settlor set it up in the form of an accumulation and maintenance trust for minors but ensured that when a suitable opportunity occurred the trustees could exercise their powers of appointment to end the accumulation and maintenance trust. This would be an open-ended invitation to avoidance on a massive scale, and I am sure the right hon. Gentleman appreciates that point. That is why I am unable to commend that amendment to my hon. Friends.

Amendment agreed to.

Amendment proposed : No. 198, in page 86, line 15, at end insert :

10
settlement (but not on any capital distribution which, under paragraph 9 above, is treated as made out of property comprised in a separate settlement made after 26th March 1974) shall be the following percentage of the rate at which it would be chargeable apart from this paragraph, that is to say—


(a) 10 per cent. if the capital distribution is made before 1st April 1976 ;


(b)12½ per cent. if it is made after 31st March 1976 but before 1st April 1977 ;


(c)15 per cent. if it is made after 31st March 1977 but before 1st April 1978 ;


(d)17½ per cent. if it is made after 31st March 1978 but before 1st April 1979 ; and


(e)20 per cent. if it is made after 31st March 1979.


15
(3) Where any capital distribution made after 31st March 1976 but before 1st April 1977 could not have been made except as the result of some proceedings before a court, this paragraph shall have effect in relation to it as if it had been made before 1st April 1976.


20
(4) Sub-paragraph (2) above does not apply in relation to a capital distribution treated as made under paragraph 12(2) above.


25
(5) Sub-paragraph (2) above does not apply—


(a)in relation to a capital distribution treated as made under paragraph 6(2) above, unless the person becoming entitled as mentioned therein ; or


(b)in relation to a capital distribution treated as made under paragraph 14(3) below, unless each of the beneficiaries referred to therein ; or


(c)in relation to a distribution payment made for the benefit of any person, unless that person ;


is an individual who is domiciled in the United Kingdom at the time the capital distribution is made and resident (within the meaning of the Income Tax Acts) in the United Kingdom in the year of assessment in which it is made.


30
(6) In this paragraph expressions defined for the purposes of paragraphs 6 to 10 above have the same meanings as in those paragraphs '.—[Dr. Gilbert.]

Amendment proposed to the proposed the amendment (h)in line 10. leave out '10' and insert '1'—[sir G Howe]

Question put That the amendment to the proposed amendment to the proposed amendment be made:—

The House divided:Ayes 249,Noes 293

Division No. 137.]
AYES
[10.40 p.m.


Adley, Robert
Costain, A. P.
Griffiths, Eldon


Aitken, Jonathan
Craig, Rt Hon W. (Belfast E)
Grist, Ian


Alison, Michael
Critchley, Julian
Grylls, Michael


Arnold, Tom
Crowder, F. P.
Hall, Sir John


Atkins, Rt Hon H. (Spelthorne)
Davies, Rt Hon J. (Knutsford)
Hall-Davis, A. G. F.


Awdry, Daniel
Dean, Paul (N Somerset)
Hampson, Dr Keith


Baker, Kenneth
Dodsworth, Geoffrey
Hannam, John


Banks, Robert
Douglas-Hamilton, Lord James
Harrison, Col Sir Harwood (Eye)


Beith, A. J.
du Cann, Rt Hon Edward
Harvie Anderson, Rt Hon Miss


Bell, Ronald
Durant, Tony
Hastings, Stephen


Bennett, Sir Frederic (Torbay)
Eden, Rt Hon Sir John
Havers, Sir Michael


Bennett, Dr Reginald (Fareham)
Edwards, Nicholas (Pembroke)
Hawkins, Paul


Berry, Hon Anthony
Elliott, Sir William
Hayhoe, Barney


Biffen, John
Emery, Peter
Heseltine, Michael


Biggs-Davison, John
Eyre Reginald
Hicks, Robert


Blaker, Peter
Fairbairn, Nicholas
Higgins, Terence L.


Boscawen, Hon. Robert
Fairgrieve, Russell
Holland, Philip


Bowden, A. (Brighton, Kemptown)
Farr, John
Hordern, Peter


Boyson, Dr. Rhodes (Brent)
Fell, Anthony
Howe, Rt Hn Sir Geoffrey


Bradford, Rev Robert
Finsberg, Geoffrey
Howell, David (Guildford)


Braine, Sir Bernard
Fisher, Sir Nigel
Howells, Geraint (Cardigan)


Brittan, Leon
Fletcher, Alex (Edinburgh N)
Hunt, John


Brotherton, Michael
Fletcher-Cooke, Charles
Hurd, Douglas


Brown, Sir Edward (Bath)
Fookes, Miss Janet
Hutchison, Michael Clark


Bryan, Sir Paul
Fowler, Norman (Sutton C'f'd)
Irving, Charles (Cheltenham)


Buchanan-Smith, Alick
Fox, Marcus
James, David


Buck, Antony
Fraser, Rt Hon H. (Stafford &amp; St)
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)


Budgen, Nick
Freud, Clement
Jessel, Toby


Bulmer, Esmond
Fry, Peter
Johnson Smith, G. (E. Grinstead)


Burden, F. A.
Galbraith. Hon. T. G. D.
Jones, Arthur (Daventry)


Butler, Adam (Bosworth)
Gardiner, George (Reigate)
Jopling, Michael


Carlisle, Mark
Gardner, Edward (S Fylde)
Joseph, Rt Hon Sir Keith


Carson, John
Gilmour, Sir John (East Fife)
Kaberry, Sir Donald


Chalker, Mrs Lynda
Glyn, Dr Alan
Kershaw, Anthony


Channon, Paul
Goodhart,. Philip
Kilfedder, James


Clark, Alan (Plymouth, Sutton)
Goodhew, Victor
Kimball, Marcus


Clark, William (Croydon S)
Goodlad, Alastair
King, Evelyn (South Dorset)


Clarke, Kenneth (Rushcliffe)
Gorst, John
King, Tom (Bridgwater)


Clegg, Walter
Gow, Ian (Eastbourne)
Knight, Mrs Jill


Cockcroft, John
Gower, Sir Raymond (Barry)
Knox, David


Cooke, Robert (Bristol W)
Grant, Anthony (Harrow C)
Lamont, Norman


[...]John
Gray, Hamish
Lane, David


Cormack Patrick
Grieve, Percy
Langford-Holt, Sir John




Latham, Michael (Melton)
Nelson, Anthony
Sinclair, Sir George


Lawrence,Ivan
Neubert, Michael
Skeet, T. H. H.


Lawson, Nigel
Newton, Tony
Smith, Cyril (Rochdale)


Lester. Jim (Beeston)
Nott, John
Smith, Dudley (Warwick)


Lewis, Kenneth (Rutland)
Onslow, Cranley
Speed, Keith


Lloyd, Ian
Oppenheim, Mrs Sally
Spence, John


Loveridge, John
Page, John (Harrow West)
Spicer, Michael (S Worcester)


Luce, Richard
Page, Rt Hon R. Graham (Crosby)
Sproat, Iain


McCrindle, Robert
Pardoe, John
Stainton, Keith


McCusker, H.
Parkinson, Cecil
Stanbrook, Ivor


Macfarlane, Neil
Penhaligon, David
Stanley, John


MacGregor, John
Percival. Ian
Steel, David (Roxburgh)


Macmillan, Rt Hon M. (Farnham)
Peyton, Rt Hon John
Steel, Anthony (Wavertree)


McNair-Wilson, M. (Newbury)
Pink, R. Bonner
Stewart, Ian (Hitchin)


McNair-Wilson, P. (New Forest)
Powell, Rt Hon J. Enoch
Stokes, John


Marshall, Michael (Arundel)
Pym, Rt Hon Francis
Stradling Thomas, J.


Marten, Neil
Raison, Timothy
Tapsell, Peter


Mates, Michael
Rathbone, Tim
Taylor, Teddy (Cathcart)


Mather, Carol
Rawlinson, Rt Hon Sir Peter
Tebbit, Norman


Maude, Angus
Rees, Peter (Dover &amp; Deal)
Temple-Morris, Peter


Maudling, Rt Hon Reginald
Rees-Davies, W. R.
Thatcher, Rt Hon Margaret


Mawby, Ray
Renton, Rt Hon Sir D. (Hunts)
Townsend, Cyril D.


Maxwell-Hyslop, Robin
Renton, Tim (Mid-Sussex)
Trotter, Neville


Mayhew, Patrick
Ridley, Hon Nicholas
Tugendhat, Christopher


Meyer, Sir Anthony
Ridsdale, Julian
van Straubenzee, W. R.


Miller, Hal (Bromsgrove)
Rifkind, Malcolm
Vaughan, Dr. Gerard


Mills, Peter
Roberts, Michael (Cardiff NW)
Viggers, Peter


Miscampbell, Norman
Roberts, Wyn (Conway)
Wainwright, Richard (Colne V)


Mitchell, David (Basingstoke)
Ross, Stephen (Isle of Wight)
Wakeham John


Moate, Roger
Ross, William (Londonderry)
Walker, Rt Hon P. (Worcester)


Moiyneaux, James
Rossi, Hugh (Hornsey)
Walters, Dennis


Monro, Hector
Rost, Peter (SE Derbyshire)
Weatherill, Bernard


Montgomery, Fergus
Royle, Sir Anthony
Wells, John


Moore, John (Croydon C)
Sainsbury, Tim
Whitelaw, Rt Hon William


More, Jasper (Ludlow)
St. John-Stevas, Norman
Wiggin, Jerry


Morgan, Geraint
Shaw, Giles (Pudsey)
Winterton, Nicholas


Morgan-Giles, Rear-Admiral
Shelton, William (Streatham)
Wood, Rt Hon Richard


Morris, Michael (Northampton S)
Shepherd, Colin
Young, Sir G. (Ealing, Acton)


Morrison, Charles (Devizes)
Shersby, Michael
TELLERS FOR THE AYES:


Morrison, Hon Peter (Chester)
Silvester, Fred
Mr.W. Benyon and


Neave, Airey
Sims, Roger
Mr. Spencer Le Marchant.




NOES


Abse, Leo
Cocks, Michael (Bristol S)
Evans, John (Newton)


Allaun, Frank
Cohen, Stanley
Ewing, Harry (Stirling)


Anderson, Donald
Coleman, Donald
Ewing, Mrs Winifred (Moray)


Archer, Peter
Colquhoun, Mrs Maureen
Faulds, Andrew


Ashley, Jack
Concannon, J. D.
Fernyhough, Rt Hon E.


Ashton, Joe
Conlan, Bernard
Flannery, Martin


Atkins, Ronald (Preston N)
Cook, Robin F. (Edin C)
Fletcher, Raymond (Ilkeston)


Atkinson, Norman
Corbett, Robin
Fletcher Ted (Darlington)


Bagier, Gordon A. T.
Cox, Thomas (Tooting)
Foot, Rt Hon Michael


Bain, Mrs Margaret
Craigen, J. M. (Maryhill)
Ford, Ben


Barnett, Guy (Greenwich)
Crawford, Douglas
Forrester, John


Barnett, Rt Hon Joel (Heywood)
Cronin, John
Fowler, Gerald (The Wrekin)


Bates, All
Crosland, Rt Hon Anthony
Fraser, John (Lambeth, N'w'd)


Bean, R. E.
Cryer, Bob
Freeson, Reginald


Benn, Rt Hon Anthony Wedgwood
Cunningham, G. (Islington S)
Garrett, John (Norwich S)


Bennett, Andrew (Stockport N)
Cunningham, Dr J. (Whiteh)
Garrett, W. E. (Wallsend)


Bidwell, Sydney
Dalyell, Tarn
George, Bruce


Bishop, E. S.
Davidson, Arthur
Gilbert, Dr John


Blenkinsop, Arthur
Davies, Bryan (Enfield N)
Ginsburg, David


Boardman, H.
Davies, Denzil (Llanelli)
Golding, John


Booth, Albert
Davies, Ifor (Gower)
Gould, Bryan


Bottomley, Rt Hon Arthur
Davis, Clinton (Hackney C)
Gourlay, Harry


Boyden, James (Bish Auck)
Deakins, Eric
Graham, Ted


Bradley, Tom
Dean, Joseph (Leeds West)
Grant, George (Morpeth)


Bray, Dr Jeremy
Delargy, Hugh
Hamilton, James (Bothwell)


Brown, Hugh D. (Provan)
Dell, Rt Hon Edmund
Hamilton, W. W. (Central Fife)


Brown, Robert C. (Newcastle W)
Dempsey, James
Hardy, Peter


Brown, Ronald (Hackney S)
Doig, Peter
Harper, Joseph


Buchan, Norman
Dormand, J. D.
Harrison, Walter (Wakefield)


Buchanan, Richard
Douglas-Mann, Bruce
Hatton, Frank


Butler, Mrs Joyce (Wood Green)
Duffy, A. E. P.
Hayman, Mrs Helena


Callaghan, Jim (Middleton &amp; P)
Dunn, James A.
Healey, Rt Hon Denis


Campbell, Ian
Dunnett, Jack
Heffer, Eric S.


Canavan, Dennis
Dunwoody, Mrs Gwyneth
Henderson, Douglas


Cant, R. B.
Eadie, Alex
Hooley, Frank


Carmichael, Neil
Edge, Geoff
Horam, John


Carter, Ray
Ellis, John (Brigg &amp; Scun)
Howell, Denis (B'ham, Sm H)


Carter-Jones, Lewis
Ellis, Tom (Wrexham)
Hoyle, Doug (Nelson)


Cartwright, John
English, Michael
Huckfield, Les


Castle, Rt Hon Barbara
Ennals, David
Hughes, Rt Hon C. (Anglesey)


Clemitson, Ivor
Evans, Gwynfor (Carmarthen)
Hughes, Mark (Durham)




Hughes, Robert (Aberdeen N)
Millan, Bruce
Small, William


Hughes, Roy (Newport)
Miller, Dr M. S. (E Kilbride)
Smith, John (N Lanarkshire)


Hunter, Adam
Miller, Mrs Millie (Ilford N)
Snape, Peter


Irving, Rt Hon S. (Dartford)
Mitchell, R. C. (Soton, Itchen)
Spearing, Nigel


Jackson, Colin (Brighouse)
Molloy William
Spriggs, Leslie


Jackson, Miss Margaret (Lincoln)
Moonman. Eric
Stallard, A. W.


Jay, Rt Hon Douglas
Morris, Alfred (Wythenshawe)
Stewart, Donald (Western Isles)


Jeger, Mrs Lena
Morris, Charles R. (Openshaw)
Stewart, Rt Hon M. (Fulham)


Jenkins, Hugh (Putney)
Morris, Rt Hon J. (Aberavon)
Stoddart, David


Jenkins, Rt Hon Roy (Stechford)
Mulley, Rt Hon Frederick
Stott, Roger


John, Brynmor
Murray, Rt Hon Ronald King
Strang, Gavin


Johnson, James (Hull West)
Newens, Stanley
Strauss, Rt Hon G. R.


Johnson, Walter (Derby S)
Noble, Mike
Summerskill, Hon Dr Shirley


Jones, Alec (Rhondda)
Oakes, Gordon
Taylor, Mrs Ann (Bolton W)


Jones, Barry (east Flint)
Ogden, Eric
Thomas, Dafydd (Merioneth)


Jones, Dan (Burnley)
O'Halloran, Michael
Thomas, Mike (Newcastle E)


Judd, Frank
O'Malley, Rt Hon Brian
Thomas, Ron (Bristol NW)


Kaufman, Gerald
Orbach, Maurice
Thompson, George


Kelley, Richard
Ovenden, John
Thorne, Stan (Preston South)


Kerr, Russell
Padley, Walter
Tierney, Sydney


Kilroy-Silk, Robert
Park, George
Tinn, James


Kinnock, Neil
Parker, John
Tomlinson, John


Lamble, David
Parry, Robert
Torney, Tom


Lamborn, Harry
Pendry, Tom
Urwin, T. W.


Lamond, James
Perry, Ernest
Varley, Rt Hon Eric G.


Latham, Arthur (Paddington)
Phipps, Dr Colin
Wainwright, Edwin (Dearne V)


Leadbitter, Ted
Prentice, Rt Hon Reg
Walden, Brian (B'ham, L'dyw'd)


Lee, John
Prescott, John
Walker, Harold (Doncaster)


Lewis, Arthur (Newham N)
Price, C. (Lewisham W)
Walker, Terry (Kingswood)


Lewis, Ron (Carlisle)
Price, William (Rugby)
Ward, Michael


Lipton, Marcus
Radice, Giles
Watkins, David


Litterick, Tom
Reid, George
Watkinson, John


Loyden, Eddie
Richardson, Miss Jo
Watt, Hamish


Luard, Evan
Roberts, Albert (Normanton)
Weetch, Ken


Lyon, Alexander (York)
Roberts, Gwilym (Cannock)
Weitzman, David


Lyons, Edward (Bradford W)
Robertson, John (Paisley)
Wellbeloved, James


Mabon, Dr J. Dickson
Roderick, Caerwyn
Welsh, Andrew


McCartney, Hugh
Rodgers, George (Chorley)
White, Frank R. (Bury)


MacCormick, Iain
Rodgers, William (Stockton)
White, James (Pollok)


McElhone, Frank
Rooker, J. W.
Whitehead, Phillip


MacFarquhar, Roderick
Roper, John
Whitlock, William


McGuire, Michael (Ince)
Rose, Paul B.
Wigley, Dafydd


Mackenzie, Gregor
Ross, Rt Hon W. (Kilmarnock)
Willey, Rt Hon Frederick


Mackintosh, John P.
Rowlands, Ted
Williams, Alan (Swansea W)


Maclennan, Robert
Ryman, John
Williams, Alan Lee (Hornch'ch)


McMillan, Tom (Glasgow C)
Sandelson, Neville
Williams, Rt Hon Shirley (Hertford)


McNamara, Kevin
Sedgemore, Brian
Williams, W. T. (Warrington)


Madden, Max
Selby, Harry
Wilson, Alexander (Hamilton)


Magee, Bryan
Shaw, Arnold (Ilford South)
Wilson, Gordon (Dundee E)


Mahon, Simon
Sheldon, Robert (Ashton-u-Lyne)
Wilson, William (Coventry SE)


Marks, Kenneth
Shore, Rt Hon Peter
Wise, Mrs Audrey


Marquand, David
Short, Rt Hon E. (Newcastle C)
Woodall, Alec


Marshall, Dr Edmund (Goole)
Short, Mrs Renée (Wolv NE)
Wrigglesworth, Ian


Marshall, Jim (Leicester S)
Silkin, Rt Hon John (Deptford)
Young, David (Bolton E)


Mason, Rt Hon Roy
Silkin, Rt Hon S. C. (Dulwich)



Meacher, Michael
Sillars, James
TELLERS FOR THE NOES:


Mellish, Rt Hon Robert
Silverman, Julius
Miss Betty Boothroyd and


Mikardo, Ian
Skinner, Dennis
Mr. Laurie Pavitt.

Question accordingly negatived

Amendment agreed to

Amendments made : No. 199, in page 86, line 44, at end insert:
' (4) Where the conditions stated in paragraphs (a) and (b) of sub-paragraph (1) above are satisfied at any time when there is only one beneficiary, they shall not be treated as ceasing to be satisfied on his death or on his attaining the specified age, if they would again be satisfied on the birth of another person.'

No. 200, in page 87, leave out lines 4 to 12.

No. 204, in page 88, leave out lines 6 and 7 and insert:
'(1)Where settled property is held on trusts which, either indefinitely or until the end of

a period (whether defined by a date or in some other way) do not permit any of the settled property to be applied otherwise than for the benefit of '.

No. 206, in page 88, leave out lines 16 to 18 and insert:
'then, subject to sub-paragraph (2) below, this paragraph applies to that settled property or, as the case may be, applies to it during that period.
(2) Where any such class is defined by reference to employment by or office with a particular body this paragraph applies to the settled property only if the class comprises all or most of the persons employed by or holding office with that body '.

No. 207, in page 88, line 44, leave out sub-paragraphs (4) to (6) and insert:
' (5) Where this paragraph applies to any settled property, tax which would otherwise


be chargeable at a relevant anniversary under paragraph (12)(1) above shall be deferred until either a capital distribution is made or this paragraph ceases to apply to the settled property and when any deferred tax becomes chargeable it shall be charged—

(a)at the rate at which it would be chargeable if the relevant anniversary fell on the date on which the tax becomes chargeable ; and
(b)on an amount determined in accordance with the following provisions of this paragraph.
(6) Where any deferred tax becomes chargeable when this paragraph ceases to apply to the settled property it shall be chargeable on an amount equal to the current value of the settled property.
(7) Where any of the deferred tax becomes chargeable when a capital distribution is made—

(a)it shall he chargeable on an amount determined under sub-paragraph (8) below ; and
(b)the amount of the tax shall reduce the amount on which tax is chargeable on that capital distribution (and if it exceeds that amount the excess shall reduce the amount on which tax is chargeable on the next capital distribution, and so on).
(8) So far as any tax which would otherwise be chargeable on a relevant anniversary becomes chargeable when a capital distribution is made it shall be charged on an amount (in this sub-paragraph referred to as the first amount) equal to the proper proportion of the current value of the property out of which the capital distribution is made : and where the capital distribution is made after the next relevant anniversary and, accordingly more than one deferred tax becomes chargeable

(a)the second deferred tax shall be charged on the first amount less the amount of the first deferred tax ; and
(b)the third deferred tax (if any) shall be charged on the amount found under paragraph (a) above less the amount of the second deferred tax ;
and so on.
(9) For the purposes of this paragraph—

(a)the current value of any property is its value at the time any tax deferred under this paragraph becomes chargeable ; and
(b)the proper proportion of the current value of any property out of which a capital distribution is made is the proportion which the amount on which tax is chargeable on the capital distribution bears to that current value ;
and in this paragraph "close company" and "participator" have the same meanings as in section 37 of this Act, "relevant anniversary" has the same meaning as in paragraph 12 above and "year" has the same meaning as in paragraph 2 of Schedule 6 to this Act'.

No. 208, in page 89, line 31, at end insert:

'Protective trusts

17A.—(1) This paragraph applies to settled property held on trusts to the like effect as

those specified in section 33(1) of the Trustee Act 1925 ; and in this paragraph "the principal beneficiary "and" the trust period" have the same meanings as in that section.

(2) Where this paragraph applies to any settled property—

(a)tax shall not be charged under paragraph 4(2) above on the coming to an end during the trust period of the principal beneficiary's interest in the property ; and
(b)a distribution payment made out of the settled property for the benefit of the principal beneficiary shall not be a capital distribution.

(3) Sub-paragraphs (5) to (9) of paragraph 17 above shall apply where this paragraph applies to any settled property as if the references to that paragraph were references to this paragraph and references to that paragraph ceasing to apply to the settled property included references to the coming to an end of the trust period.'.—[Dr. Gilbert.]

Dr. Gilbert: I beg to move Amendment No. 209, in page 89, line 31, at end insert:

' Trusts for benefit of mentally disabled persons

17B.—(1) This paragraph applies to settled property held on trusts under which, during the life of a mentally disabled person, no interest in possession in the settled property subsists and which secure that any of the settled property which is applied during his life is applied only or mainly for his benefit.

(2) Where this paragraph applies to any settled property, then—

(a)if the mentally disabled person is the settlor, neither the making of the settlement nor any addition made by him to the settled property shall be a chargeable transfer; and
(b)a distribution payment made out of the settled property for the benefit of the mentally disabled person shall not be a capital distribution.

(3) Sub-paragraphs (5) to (9) of paragraph 17 above shall apply where this paragraph applies to any settled property as if the references to that paragraph were references to this paragraph and references to that paragraph ceasing to apply to the settled property included references to the death of the mentally disabled person.

(4) In this paragraph "mentally disabled person" means a person who by reason of mental disorder within the meaning of the Mental Health Act 1959 is incapable of administering his property or managing his affairs '.

This additional paragraph, 17B, provides relief for discretionary trusts set up for the benefit of mentally handicapped persons. In substance the effect of this provision is similar to that of the Government amendment on protective trusts—the new paragraph 17A.

This separate relief for trusts for the mentally disabled provides that while


the mentally disabled person is still alive the trust fund will be relieved from the normal discretionary regime. This is subject to two conditions. The first is that the funds must be applicable only or mainly for his benefit. The second is that capital distributions to other individuals will be chargeable in the normal way.

I think that it is self-explanatory and that is as far as I wish to go at this stage, unless the House wishes to hear further from me.

Mr. Peter Rees: I wish to intervene only briefly, because the Chief Secretary said in Committee, perhaps inadvertently, that none of the so-called thalidomide trusts would be subject to tax. He gave as his reason that they were charitable settlements. As I understand the position, it is true that the main settlement set up by Distillers is a charitable settlement but, as the right hon. Gentleman recollects, and no doubt this is the basis of Amendment No. 208, if not of Amendment No. 209, there have been one or two other settlements set up by individual thalidomide children with the consent and approval of the court. Indeed, these are paralleled in other cases where they are set up on a discretionary basis for these children. They are not necessarily mentally handicapped, although they may be physically handicapped, but they are very often under the age of 18.
My hon. Friend the Member for Rushcliffe (Mr. Clarke) and I have tabled Amendment No. 552, which is marshalled with Amendments Nos. 208 and 209 and I should like with suitable immodesty, to think that it is better than the Government amendments. I hope, therefore, that the Chief Secretary will look a little more closely at it, because I am sure we both have the same objective in mind. If 1 may have the right hon. Gentleman's attention—

Mr. Deputy Speaker (Mr. George Thomas): Order. The difficulty is that the hon. and learned Member is making his speech to an amendment which has not been selected by Mr. Speaker.

Mr. Rees: I am grateful to you, Mr. Deputy Speaker. I see that in my enthusiasm for my amendment I pencilled it in and assumed that it had received your indirect benevolence.I

understand the Chief Secretary's difficulty, but, with his habitual resource, and without any prompting by his officials, no doubt he will give his undivided attention not only to Amendments Nos. 208 and 209 but to Amendment No. 552. As we are both focussed on the same objective, I trust that he has given his usual diligent attention to all the amendments on this point. I hope that he will canvass their respective merits, if only to convince the House and myself that his amendments are superior in scope and function to Amendment No. 552.

Dr. Gilbert: The main burden of the hon. and learned Gentleman's remarks was directed to the question of thalidomide trusts. I understand that the damages paid to the thalidomide victims will be fit. The hon. and learned Gentleman is right. The original trusts are charitable, and there will be subsequent trusts that will be protective. Our new relief will ensure that the interest for children will not be adversely affected.
I think that the hon. and learned Gentleman is subject to a little confusion on more than one point on this group of amendments. It is not my right hon. Friend the Chief Secretary who is answering the debate, nor was it my right hon. Friend who spoke on this subject in Committee upstairs. I referred to thalidomide trusts and gave an assurance about them, because I thought they would be covered by the regime for charitable trusts. It was only when we discovered that that was not the case that we introduced Amendment No. 208 to set up new paragraph 17A to the schedule, which covers the point the hon. and learned Gentleman has in mind.

Mr. Graham Page: We are dealing in this group with the amendments to amendment No. 209 which add blind persons to the category of mentally disabled persons. It is extremely difficult to draw the line when one starts to consider persons with disability. The amendments seek to give relief to trusts which are for the benefit of blind as well as mentally disabled persons. There is a good case for saying that blindness is a well-defined disability which deserves the benefits which are given to protective trusts and disabled persons by Amendments Nos. 208 and 209. Will the Financial Secretary say why he rejects


the amendments to include blind persons under the beneficial Amendment No. 209?

11.0 p.m.

Dr. Gilbert: With the leave of the House, Mr. Deputy Speaker. I did not refer to the amendments because the hon. and learned Member for Dover and Deal (Mr. Rees) did not refer to Amendment No. 209 and I was trying to help the Opposition to make progress.
The right hon. Member for Crosby (Mr. Page) is right in saying that there is no problem in identifying the blind, and various income tax reliefs are given to them in fiscal legislation. There is a difference between those who are mentally handicapped and those who are physically handicapped. Although we all have the greatest sympathy with the physically handicapped in the difficulties they encounter, there is not the same need to set up a special type of discretionary trust the help them handle their affairs as there is for the mentally handicapped. I think I carry the House with me on that.
I am grateful to the right hon. Gentleman for not seeking to make this an emotional matter. Treasury Ministers sometimes have the difficult job of saying that they think that the relief should go to the mentally disabled. The physically handicapped are in a different category. If a discretionary trust comes into existence for their benefit it is not impossible to create a protective life interest for those individuals which will attract the reliefs available under Amendment No. 208.

Amendment agreed to.

Amendment made: No. 211, in page 90. line 26, leave out ' 26th ' and insert ' 27th '.—[Mr. Joel Barnett.]

Schedule

EXEMPT TRANSFERS

Mr. Joel Barnett: I beg to move Amendment No. 215, in page 92, line 17, leave out from beginning to ' are '.

Mr. Deputy Speaker: With this it will be convenient to consider the following amendments:

No. 216, in page 92, line 17, leave out from beginning to ' are ' and insert:

'unless exempt by virtue of any other paragraph of this Schedule'.

No. 218, in page 92, line 20, after ' values ', insert:
'(if any) fall short of £1,000, the amount by which they so fall short shall, in relation to the next following year, be added to the £1,000 mentioned in sub-paragraph (1) above; and where they'.

Amendment (a), in line 2, leave out' the next following year ' and insert ' succeeding years'.

Amendment (b), in line 3, after ' above ', insert:
' and if in the following year relief has not been fully given for the amount by which these values fall short of £1,000 on the basis that all transfers of value in that year are first attributed to the sum of £1,000 applicable to that year a person may make a claim requiring any portion by which those values fell short to be carried forward and, as far as may be, deducted from chargeable transfers made in any of the six subsequent years'.

No. 443, in page 92, line 21, after ' made ', insert ' in the year '.

No. 444, in page 92, line 26, at end insert:
' and
(c) shall be attributed to amounts brought forward from an earlier year rather than a later year'.

No. 459, in page 92, line 29, at end insert:
' (4) For the avoidance of doubt the exemption contained in this paragraph is in addition to those contained elsewhere in this Act and is not to be restricted by virtue of any other transfers of value which are exempt transfers by virtue of any other section of this Act or paragraph of any Schedule to this Act having been made within the same year'.

No. 224, in page 92, line 45, at end insert:

' Small gifts to same person

3A.—(1) Transfers of value made by a transferor in any one year by outright gifts to any one person are exempt to the extent that the values transferred by them (calculated as values on which no tax is chargeable) do not exceed £100.

(2) In this paragraph "year" has the same meaning as in paragraph 2 above '.

Amendment (a), in line 1, leave out ' outright'.

Amendment (c), in line 2, leave out' by outright gifts'.

Amendment (b), in line 3, after ' £100 ', insert:
' or in the case of persons not connected with the transferor £200'.

Amendment (e), in line 3, at end insert:
'and this exemption will be additional to all the exemptions in this Part of this Act.'.

No. 808, in page 93, line 6, leave out sub-paragraph (a).

No. 403, in page 93, line 9, at end insert:
' and this exemption will be additional to all the exemptions in this Part of this Act'.

No. 747, in page 93, line 42, at end insert:
' and these exemptions will be additional to all other exemptions in this Part of this Act.'.

No. 746, in page 93, line 43, at end insert:
' and this exemption will be additional to all the exemptions in this Part of this Act.'.

No. 748, in page 98, line 30, at end insert:
' 13A. Where on the death of any spouse, the transfer of value chargeable under section 22(1) of this Act does not exceed £15,000, the amount of the difference between the amount chargeable and £15,000 shall be deducted from the transfer of value chargeable under section 22(1) of this Act on the death of the other spouse.'

Mr. Barnett: Amendment No. 215 is essentially a drafting amendment. Paragraph 2(1) of Schedule 6 provides that transfers of value made by transferors in any one year and not exempt under any other provision are to be exempt if they are under £1,000. The amendment deletes
 and not exempt under any other provision 
The amendment clarifies a point raised in Committee. I shall be happy to deal with other matters if hon. Gentlemen refer to them.

Mr. David Howell: The amendment is one of a series of important Government amendments. I hope that in due course we shall be able to make the Chief Secretary happy by allowing him to elaborate upon them, if that is what makes him happy.
The Chief Secretary said that Amendment No. 215 is just a drafting amendment. I hope he is right about that. I raised this matter earlier as a puzzling amendment which we looked forward to discussing when we reached Schedule 6, if we did. With a few minutes in hand we shall have the privilege, by courtesy of the Government, of being allowed to discuss the schedule.
It is a little puzzling. It has attracted outside comment, too. It could be that this amendment, which is said to be purely a drafting amendment, could have a devastating effect. The way it has been read by expert commentators, and by some of my right hon. and hon. Friends is not as being a drafting amendment at all but as an amendment which would have the effect of excluding some of the other provisions under which small gifts are exempt from capital transfer tax.
For instance, another Government amendment, to which the Chief Secretary did not refer, makes a provision for small gifts of £100 to be relieved. We would like to be absolutely sure that this omission of the words
 and not exempt under any other provision 
does not knock out Amendment No. 224 which is included in this group. We would like elaboration on this in due course.
This set of amendments also includes an important amendment, No. 218, to which my right hon. and hon. Friends have tabled a number of amendments proposing that its effect be modestly extended. In particular, we have tabled Amendment (b) which makes the modest proposal that the roll-over for the first £1,000 of gifts from the transferor, which is currently exempt, should be extended not merely into "the following year, as by Government Amendment No. 218, but for the subsequent six years. This is a reasonable addition to an amendment which in itself is obviously an improvement on a situation in which there was no roll-over.
Those are our initial reactions to an extensive set of Government amendments on which we would like to hear more in due course. With the leave of the House, I will make some final comments after my right hon. and hon. Friends have spoken.

Mr. Joel Barnett: I am sorry that Conservative Members think that this amendment goes wider than I have indicated. The words we are deleting:
 "and not exempt under any other provision 
are, we are advised, unnecessary. What they say goes without saying. The Bill provides a range of exemptions which is increased with the amendments we have tabled on Report. Any transfer which


is exempted by any of the other provisions of the Bill is left out of account and does not, therefore, come within the ambit of the £1,000 annual exemption.
Government Amendment No. 218 allows unused amounts of the £1,000 annual exemption to be carried forward for one year. This again arises out of discussion in Committee when it was suggested that without some kind of rollover for succeeding years, it would be hard on a man who did not have the £1,000 in a given year.
The hon. Member for Guildford (Mr. Howell) referred to the Opposition amendment which would roll over the figure for six years. That goes much further. There are two amendments, one of which would roll it forward indefinitely. That would be wholly unacceptable. The second one turns it into a six-year roll-over. This would be excessive in addition to the exemptions already in the Bill.
Amendment No. 224 provides for the exemption of outright gifts not exceeding £100 to any one recipient in the tax year. The example was advanced in Committee that some Opposition Members were likely to make gifts of up to £100 a year, say, to the dustman or some such recipient, and that that might be subject to CTT. We arranged to table an amendment to help those hon. Gentlemen who might have been so caught.
If there are any other points, I should be happy to deal with them.

Mr. Lawson: Will the Chief Secretary explain the point of principle which lies behind the denial of roll-over for a period of six years? It is incomprehensible. If one taxpayer is able to give away £6,000 in slices of £1,000 a year but another taxpayer, because of the form in which he holds the assets and his circumstances, cannot give £1,000 a year in those slices but can give only £6,000 at the end of six years, why should the second taxpayer be put in a much worse position than that in which the first taxpayer finds himself?
The Chief Secretary will remember from the example quoted in Standing Committee involving the famous shop that it is intended that the money should be transferred in slices. It might be difficult for some people to do it in slices of £1,000 and thereby incur unneces-

sary stamp duty. Therefore, why is there discrimination between one taxpayer and another?

Mr. MacGregor: I should like to follow up what has been said so far, before dealing specifically with Amendment No. 808.
It would appear that there is discrimination in applying the principle of rollover as between those whose assets are tied up and those who may not be so well off. I can envisage the situation in which those who are most able to take advantage of the £1,000-a-year exemption are those who are wealthy enough to give away £1,000 each year. Our proposal, which seeks to give roll-over for six years, will ease the problem of those who have their assets tied up.
The provision still does not go beyond what the Government wish to do. The Government have accepted the principle of £1,000 in any one year. However, our suggestion eases the position and removes some of the discrimination against those in less favourable situations to take advantage of situation.
I wish to refer to Amendment No. 808, which was tabled following the debate in Committee on normal expenditure made out of income. The amendment seeks to remove the condition that it must be normal expenditure by the transferor. It was made clear that "normal" would be interpreted as "habitual ". I have a slight worry that the transferor who is giving some transfer out of his income but who is giving it for only one or two years will not get the exemption out of this provision because he will not have done it as part of normal expenditure, and will receive exemption only if he is shown to have given that type of gift for a number of years habitually.
It would appear that for the purposes of CTT all that one needs to be concerned with is that the expenditure was made out of income and was in accordance with the usual standard of living. I wish to ask whether it is necessary to include the fact that this should be part of the normal expenditure of the transferor. It will favour those who are in the habit of giving regular gifts, but for those who wish to give sums out of income for a brief period it appears that they will not be able to do so because of the reference of the need to be part


of the normal expenditure. If I am wrong, I hope that the Chief Secretary will say so. Since we have not been able to debate the matter fully on Report, I believe the matter deserves to be examined in time for the next Finance Bill.

11.15 p.m.

Mr. Ridley: I suppose that I must give grudging thanks that at least the point has been met to the extent that the £1,000 can be rolled over for an extra year. It was part of my case in Committee that it should be accumulatable—if that is the right word—and should be available for each year. That would have made a great difference to those who may not have so much money and who have their money invested long term. It would have given them an advantage at the expense of the very rich person, who could easily find £1,000 every year out of his capital. I cannot see why the Government will not accept the six-year proposal, which would involve no loss to the Revenue but which would greatly ease the problems of some people who are far from liquid and who will not be able to find the money easily.
Paradoxically, I think that the effect of the £1,000 allowance will be to cause practically everybody who can find it to give £1,000 a year to his children which he would not otherwise have given. There are already advertisements in the newspapers saying how to claim the £1,000 allowance for capital transfer. This rush to distribute £1,000, which in many cases should not be distributed, is a result of this evil legislation. It would have been much better not to have it, but the Government have insisted on doing it. I believe that shares, money and business will start to be broken up. to be cut into small salami slices and distributed to children long before it is necessary, so that the annual £1,000 allowance may be claimed. I ask the Government to reconsider the matter. Why it should not be accumulated is beyond me.
Another point is that the fact that the £1,000 is available to both parents effectively means that with a little manipulation each parent can give £1.000 for each year without any trouble, if they have the money. But it is hard on one-

parent families. There are many reasons —divorce, death or sometimes failure to marry in the first place—why one-parent families exist. For them, the relief is effectively halved.
My hon. Friend the Member for Blaby (Mr. Lawson) said that he had one wife and four children. It would clearly be more advantageous if he had four wives and no children. There will be four-parent families, where the original parents have been divorced and have re-married. Four sets of allowances will be available to them.
That is the sort of muddle and unhappy situation into which the Government have got us through the whole structure of the tax. I ask the Government to make a special concession in the next stage of the Bill, which starts next month, to allow one-parent families to have a double concession. On all grounds of equity it will be unfair if they do not do that.
The £1,000 will become worth much less every year as a result of inflation. I hope that there will be a proper review of the figure, and that it will be changed as the value of money falls. I know that the Government's intention is to inflate merrily and busily destroy the value of our money, so that even the meagre £1,000 a year will become virtually valueless. We have seen many figures in our tax law eroded by inflation, and the Government do nothing to change them. It is difficult to find an opportunity to make the necessary changes.
I hope that the Government will give an undertaking to keep these figures under review. I hope that they will change them frequently and make them worth what they are intended to be worth. I am grateful for the small concession that has been obtained, but I hope that the Government will go further and deal with the problem of one-parent families. That should find favour in their eyes.

Mr. Graham Page: This group of amendments deals with the roll-over and the accumulation during the one year. As regards the roll-over of £1,000, it can be taken forward for the next year and £2,000 can be given in one year. Am I correct in thinking that the 24th March 1974 to 5th April 1974 was one year under the Bill? If that is so, for this year, and before 5th April, we can give £2,000. I do not know whether the Chief


Secretary can confirm that. It seems that that can happen from the terms of the Bill.
I now turn to the accumulation for one year. It is not clear from the Bill and the amendments whether Amendment No. 224 allows gifts of £100 and whether we have to take those sums of £100 into account against the £1,000 gifts which are already exempt by the Bill. That is what I mean by the accumulation for this year. That must apply to all other exemptions under Schedule 6. Are we to add them all together or take one from the other? If 10 instalments of £100 are given, does that make up the £1,000 under the Bill as it stands? I hope that that is not so. I hope that all the exemptions apply consecutively and that they are not to be lumped together.

Mr. Gow: I have an inbuilt prejudice against the indexation of taxation. Despite that prejudice, when we have inflation running at its present rates I agree with the suggestion made by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) about the exemption figure of £1,000 which appears in Schedule 6. The provisions of the Bill are retrospective to 26th March. They are retrospective to a date practically a year ago. If we take the purchasing value of £1,000 on 26th March 1974 and we take its purchasing value today we shall find that it has declined by rather more than 20 per cent.
I hope that the Chief Secretary, for the limited period during which the present administration is in office, will give an undertaking that the limits in the Bill will be indexed to take account of the appalling rates of inflation which we are suffering under the disgraceful administration of this Government. It is all very well for the right hon. Gentleman to nod his head in the way to which we have become accustomed, but this is a serious matter. If the Government were saying that a correct figure for the exemption was £1,000 on 26th March 1974, how can the Chief Secretary say that the same figure is the correct exemption today?
My right hon. Friend the Member for Crosby (Mr. Page) had an extremely important point to raise when he referred to the concession to which the Chief Secretary referred—namely, a gift to a

transferee not being a person connected with the transferor. My right hon. Friend made a point about the number of wives and children that we have. I suffer from the misfortune—

Mr. Ron Lewis: How many?

Mr. Gow: Just the one wife and two children. It would have been very much better if I had been able to reverse the process. I hope that the Chief Secretary will address himself seriously to this matter when he replies.

Mr. James Wellbeloved: The more I listen to this short debate, the more I become concerned about the concessions which my right hon. and hon. Friends appear to have made as a result of the debates in Standing Committee. I am tempted to say to my hon. Friend that, when we come to the "roll-over" amendment and Amendment No. 224, we should plead with the Chief Secretary to withdraw these concessions. if he does not, I shall be tempted to go into the Division Lobby against them.
It appears from many of the speeches to which we have listened to be almost a yearly occurrence in some quarters to pass to one's children in cash the sum of £1,000. I must confess that I know of no one within my immediate circle of acquaintances who is so endowed with the good fruits of this earth that he can do that. What is more, when I come to the wrong concession in Amendment No. 224, I can think of no one working in the factories of Erith and Crayford on the shop floor who could even make a gift of £100 to his children. I hope that my right hon. Friend the Chief Secretary can be persuaded to withdraw these concessions. If he does not, it may be that sufficient of us will go into the "No" Lobby to ensure that the Government do not implement these two concessions.
I came into the Chamber prepared to accept that my right hon. and hon. Friends had their responsibilities to those people who voted Labour in the last General Election in the right perspective. But when I see them bowled over—

Mr. Joel Barnett: No.

Mr. Wellbeloved: My right hon. Friend says "No ". but there must have been some pretty heavy pressure put on him.


I remind him that, at a time when he is saying that there is not sufficient public money available for some extremely desirable projects in my own area, he is making a concession of this kind. I come from an area where a Conservative-controlled council only last week decided to deny opportunities for retired citizens to have five meals a week at a pop-in luncheon parlour and reduced it to one. I feel a little bitter when I hear hon. Members asking for people to have the right to roll over for three, four, five or six years the ability to pass over £1,000 a year as and when they can lay their hands on the necessary liquid assets. When I think of the disadvantages endured by working people in my constituency and those of others of my hon. Friends, I say in all seriousness to my right hon. and hon. Friends that they have made unreasonable and unnecessary concessions to the Opposition. I hope that my hon. Friends will join me in opposing them.

Mr. Pardoe: The hon. Member for Erith and Crayford (Mr. Wellbeloved) has made an extraordinary attack on the Bill, which is a tax on generosity. I do not see why he should choose this moment to launch his attack, and I have no intention of spending time on what he said, except to say that in the view of most hon. Members on the Opposition benches the Chief Secretary has made all too few concessions.

Mr. Wellbeloved: Too many.

Mr. Pardoe: It is about one of the right hon. Friend's so-called concessions that I am particularly concerned. I doubt very much whether Amendment No. 215 is a concession at all. I cannot understand what the right hon. Gentleman feels he has done by leaving out the words
… and not exempt under any other provision.
The trouble is that the reasons which the Chief Secretary has advanced and the explanations which he has given are entirely opposite to the advice of a very large number of people outside this House who specialise in these matters.
Therefore, it would be helpful, other than the speech made by the right hon. Gentleman and the explanation that he has given, if we could have some. detailed

explanation by the Inland Revenue in the form of this extra-statutory explanation—namely, Press releases through the Press Office—of how the Government see the £1,000 if this amendment is carried.

11.30 p.m.

Mr. Joel Barnett: I am sorry that the outside advice tendered to the hon. Member for Cornwall, North (Mr. Pardoe) is that the £1,000 exemption will not stand on its own. My inside advice is that it is exactly as I told the House earlier. The Revenue will be putting out an explanatory note on the Bill when we have Third Reading shortly. Therefore, I shall be happy for him to look at it with his outside advisers.

Mr. MacGregor: Does the Chief Secretary agree that there would be no misunderstanding at all if he left the Bill as it was, because it was crystal clear to everyone?

Mr. Barnett: That was not what was said in Committee upstairs. It was the reverse there. Because of what was said in Committee upstairs we had another look at this matter and found that the words which are to be removed by Amendment No. 215 were unnecessary. I assure the hon. Gentleman that, on the best advice I have received, the effect of Amendment No. 215 will be that the £1,000 will stand on its own. I cannot go beyond that.

Mr. Pardoe: Will the right hon. Gentleman consider amendment No. 216, which is linked with this amendment, which will make the whole matter clear? Amendment No. 216 seeks to insert,
 unless exempt by virtue of any other paragraph of this Schedule ".

Mr. Barnett: I do not know what virtue the hon. Gentleman sees in that amendment. In any event the phrase now in the Bill will be removed by Amendment No. 215. It may be that the hon. Gentleman has not had an opportunity to take further advice. I see the hon. Member for Blaby (Mr. Lawson), always ready to help in these matters, is helping him a little further.
We have again come back to whether £1,000 a year is sufficient or should be allowed to accumulate over the years because of the man who would not have £1,000 in a given year. This matter


arose over what hon. Gentlemen were inclined to call the Gilbert and Sullivan shop, about which they had a lot of fun upstairs. The only reason that they found it so amusing was that they genuinely did not understand the problems of the small shopkeeper. This has become clear throughout our debates. Indeed, it has become even more clear to my hon. Friends who have heard this on Report, particularly those who heard it upstairs.
As is made clear in Clause 39, which will be in operation from 1976—we must not get too excited—interest-free loans would not be subject to capital transfer tax. It would be a simple matter to make a nominal loan of £1,000 and for the recipient—that is, the shop or small business—to lend it back again interest-free and there would be no liability to capital transfer tax. There is no need to spread the loan over six years or more. Indeed, that would be tantamount to increasing the £15,000 exemption which is already in the Bill. I know that even if I were mindful to make such a further concession, I should have considerable trouble from some of my hon. Friends. I assure them that I have no such intention.
The hon. Member for Cirencester and Tewkesbury (Mr. Ridley), always good measure, excelled himself when he talked about the meagre £1,000 a year. That is not enough for the hon. Gentleman. Indeed, he finds it a trifling sum. Hon. Gentlemen opposite live in some strange world where everybody is in a position to give £1,000 a year quite easily. Indeed, he said "Everybody is now giving away £1,000 a year. Who is not giving away £1,000 a year? "In Cirencester and Tewkesbury this must be happening every year, but in Heywood and Royton and most points north of Watford that does not happen all that often. [Interruption.] It is true that we do not generally understand the hon. Gentleman. It is difficult to follow the point of his argument. I thought that we had been pretty lair—indeed, as my hon. Friend said, more than reasonable.
The right hon. Member for Crosby (Mr. Page) talked about the gifts of up to £100 not being taken against the £1,000 a year allowance. I am happy to say that that cannot happen, because the £1,000 will stand on its own. The right

hon. Gentleman, with his usual perception—this comes of sleeping with the Bill day and night over the weeks and months —made it clear that, as the tax came into operation before 5th April 1974, there are two years up to 5th April 1975.
The hon. Member for Eastbourne (Mr. Gow), who does not like indexation, wants indexation for this tax. I have a feeling that that was only because he did not like to incur the displeasure of his hon. Friend the Member for Blaby. Indeed, I saw the hon. Member for Blaby scowling at him. We all know the obsession of the hon. Member for Blaby with indexation. He thinks that it is a panacea for all our problems.

Mr. Gow: The Chief Secretary is wrong. I said that I objected to indexation in principle because it tends to condone inflation as a permanent evil, but I argued in favour of indexation while we have the present Government in office.

Mr. Barnett: That is a very strange argument. Even the lion. Member for Blaby is glowering at the hon. Gentleman. That was an absolutely disgraceful comment. I cannot accept the argument for indexing the tax, but, as my hon. Friend and I have indicated all along, the rates will be kept under constant review and we will be coming back to the tax again and again in future Finance Bills, so we shall have opportunities to consider the matter. The Government will review these matters regularly.
We kept coming back to estate duty time and again for 80 years, and Conservative Governments always failed to do anything about it. It is now clear that Conservatives are delighted not to have done anything about it. Indeed, they would have preferred to have kept it.
I hope that my right hon. and hon. Friends will resist the Opposition amendments. I think we have been very fair already—indeed, as my hon. Friend said, probably too fair.

Mr. David Howell: We are running true to form at 20 minutes to the twelfth hour, in the t we are busy having to postpone further consideration of aspects of this Bill to the next stage—that is, to the next Finance Bill, which is already looming up. It looks as though that will be handled with exemplary skill by my


right hon. and hon. Friends in instructing Treasury Ministers what it is about.
These several amendments bring home better than anything has so far done the complete schizophrenia of the Labour administration in dealing with tax administration. On the one hand, throughout the Bill everyone from the Chancellor downwards, or "alongwards ", has been sneering at the vast sums of £1,000 a year which so few people have to pass on.

Mr. Cormack: Where is the Chancellor?

Mr. Howell: On the other hand, the Chancellor has been telling us in the Daily Express—the Chancellor is not here very much, but he speaks in the Daily Express occasionally—that it is through the agency of the provision for the £1,000 a year exemption and now the roll-over to £2,000 a year that it will be possible for the small trader, for the garage owner, for the owners of the shop in the High Street, for the owner of the small business in the market town, to hand on his business to his son without incurring a prohibitive liability to tax. Indeed, the Chancellor, the Chief Secretary and the Financial Secretary have made a virtue of this loophole. Here we have the schizophrenia. On the one hand £1,000 is a criminally large amount of money to have. On the other hand, it is the only means by which, according to the Government, the worst iniquities of this tax can be avoided.
We have amendment (b) which would slightly alleviate the matter by extending the roll-over to six years. It will not remove the worst effects of this tax for the very good reason, which hon. Members opposite have difficulty in understanding, that one cannot unscramble a business and dish out the so-called wealth involved in productive assets, thousand by thousand or five thousand by five thou-

sand. It is not possible to pull down a wall or demolish a counter in a shop or sell a petrol pump and dispose of the proceeds to one's children. This gives rise to the fatuities of the Gilbert and Sullivan shop.

The Labour administration do not begin to understand what immense damage this tax will do to small and medium-sized private family businesses in the constituencies of hon. Members, but they will know about it when the letters come in about the redundancies. Be sure of that. They will know about it when the unemployment starts in the family businesses in their constituencies.

In the meantime, we have other business to turn to in the remaining minutes allowed us by this vicious guillotine. I therefore urge my hon. Friends to vote on Amendment (b) which we shall move when we are allowed to do so to show our rejection of the spirit and intention behind this amendment.

Amendment agreed to.

Amendment proposed : No. 218, in page 92, line 20, after ' values ', insert
' (if any) fall short of £1,000, the amount by which they so fall short shall, in relation to the next following year, be added to the £1,000 mentioned in sub-paragraph (1) above ; and where they '.—[Mr. Joel Barnett.]

Amendment proposed to the proposed amendment : (b), in line 3, after ' above ', insert
'and if in the following year relief has not been fully given for the amount by which these values fall short of £1,000 on the basis that all transfers of value in that year are first attributed to the sum of £1,000 applicable to that year a person may make a claim requiring any portion by which those values fell short to be carried forward and, as far as may be, deducted from chargeable transfers made in any of the six subsequent years '.—[Mr. David Howell.]

Question put, That the amendment to the proposed amendment be made :—

The House divided : Ayes 246, Noes 293.

Division No. 137.]
AYES
[10.40 p.m.


Adley, Robert
Bennett, Dr Reginald (Fareham)
Brittan, Leon


Aitken, Jonathan
Benyon, W.
Brotherton, Michael


Alison, Michael
Berry, Hon Anthony
Brown, Sir Edward (Bath)


Arnold, Tom
Bitten, John
Bryan, Sir Paul


Atkins, Rt Hon H. (Spelthorne)
Biggs-Davison, John
Buchanan-Smith, Alick


Awdry, Daniel
Blaker, Peter
Buck, Antony


Baker, Kenneth
Boscawen, Hon. Robert
Budgen, Nick


Banks, Robert
Bowden, A. (Brighton, Kemptown)
Bulmer, Esmond


Beith, A. J.
Boyson, Dr. Rhodes (Brent)
Burden, F. A.


Bell, Ronald
Bradford, Rev Robert
Carlisle, Mark


Bennett, Sir Frederic (Torbay)
Braine, Sir Bernard
Carson, John




Chalker, Mrs Lynda
Hunt, John
Parkinson, Cecil


Channon, Paul
Hurd, Douglas
Penhaligon, David


Clark, Alan (Plymouth, Sutton)
Irving, Charles (Cheltenham)
Percival, Ian


Clark, William (Croydon S)
James, David
Peyton, Rt Hon John


Clarke, Kenneth (Rushcliffe)
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd;
Pink, R. Bonner


Clegg, Walter
Jessel, Toby
Powell, Rt Hon J. Enoch


Cockcroft, John
Johnson Smith, G. (E. Grinstead)
Pym, Rt Hon Francis


Cooke, Robert (Bristol W)
Jones, Arthur (Daventry)
Raison, Timothy


Cope, John
Jopling, Michael
Rathbone, Tim


Cormack, Patrick
Joseph, Rt Hon Sir Keith
Rawlinson, Rt Hon Sir Peter


Costain, A. P.
Kaberry, Sir Donald
Rees, Peter (Dover &amp; Deal)


Craig, Rt Hon W. (Belfast E)
Kershaw, Anthony
Rees-Davies, W. R.


Critchley, Julian
Kilfedder, James
Renton, Rt Hon Sir D. (Hunts)


Crowder, F. P.
Kimball, Marcus
Renton, Tim (Mid-Sussex)


Dean, Paul (N Somerset)
King, Evelyn (South Dorset)
Ridley, Hon Nicholas


Dodsworth, Geoffrey
King, Tom (Bridgwater)
Ridsdale, Julian


Douglas-Hamilton, Lord James
Knight, Mrs Jill
Rifkind, Malcolm


du Cann, Rt Hon Edward
Knox, David
Roberts, Michael (Cardiff NW)


Durant, Tony
Lamont, Norman
Roberts, Wyn (Conway)


Eden, Rt Hon Sir John
Lane, David
Ross, Stephen (Isle of Wight)


Edwards, Nicholas (Pembroke)
Langford-Holt, Sir John
Ross, William (Londonderry)


Elliott, Sir William
Latham, Michael (Melton)
Rossi, Hugh (Hornsey)


Emery, Peter
Lawrence, Ivan
Rost, Peter (SE Derbyshire)


Eyre Reginald
Lawson, Nigel
Royle, Sir Anthony


Fairbairn, Nicholas
Le Marchant, Spencer
Sainsbury, Tim


Fairgrieve, Russell
Lester, Jim (Beeston)
St. John-Stevas, Norman


Farr, John
Lewis, Kenneth (Rutland)
Shaw, Giles (Pudsey)


Fell, Anthony
Lloyd, Ian
Shelton, William (Streatham)


Finsberg, Geoffrey
Loveridge, John
Shepherd, Colin


Fletcher, Alex (Edinburgh N)
Luce, Richard
Shersby, Michael


Fletcher-Cooke, Charles
McCrindle, Robert
Sims, Roger


Fookes, Miss Janet
McCusker, H.
Sinclair, Sir George


Fowler, Norman (Sutton C'f'd)
Macfarlane, Neil
Skeet, T. H. H.


Fox, Marcus
MacGregor, John
Smith, Cyril (Rochdale)


Fraser, Rt Hon H. (Stafford &amp; St)
Macmillan, Rt Hon M. (Farnham)
Smith, Dudley (Warwick)


Freud, Clement
McNair-Wilson, M. (Newbury)
Speed, Keith


Fry, Peter
McNair-Wilson, P. (New Forest)
Spence, John


Gardiner, George (Reigate)
Marshall, Michael (Arundel)
Spicer, Michael (S Worcester)


Gardner, Edward (S Fylde)
Marten, Neil
Sproat, Iain


Gilmour, Rt Hon Ian (Chesham)
Mates, Michael
Stainton, Keith


Gilmour, Sir John (East Fife)
Mather, Carol
Stanbrook, Ivor


Glyn, Dr Alan
Maude, Angus
Stanley, John


Goodhart Philip
Maudling, Rt Hon Reginald
Steel, David (Roxburgh)


Goodhew, Victor
Mawby, Ray
Steen, Anthony (Wavertree)


Goodlad, Alastair
Maxwell-Hyslop, Robin
Stewart, Ian (Hitchin)


Gorst, John
Mayhew, Patrick
Stokes, John


Gow, Ian (Eastbourne)
Meyer, Sir Anthony
Stradling Thomas, J.


Gower, Sir Raymond (Barry)
Miller, Hal (Bromsgrove)
Tapsell, Peter


Grant, Anthony (Harrow C)
Mills, Peter
Taylor, Teddy (Cathcart)


Gray, Hamish
Miscampbell, Norman
Tebbit, Norman


Grieve, Percy
Mitchell, David (Basingstoke)
Temple-Morris, Peter


Griffiths, Eldon
Moate, Roger
Thatcher, Rt Hon Margaret


Grimond, Rt Hon J.
Molyneaux, James
Townsend, Cyril D.


Grist, Ian
Monro Hector
Trotter, Neville


Grylls, Michael
Montgomery, Fergus
Tugendhat, Christopher


Hall, Sir John
Moore, John (Croydon C)
van Straubenzee, W. R.


Hall-Davis, A. G. F.
More, Jasper (Ludlow)
Vaughan, Dr. Gerard


Hampson, Dr Keith
Morgan, Geraint
Viggers, Peter


Hannam, John
Morgan-Giles, Rear-Admiral
Wainwright, Richard (Colne V)


Harrison, Col Sir Harwood (Eye)
Morris, Michael (Northampton S)
Wakeham. John


Harvie Anderson, Rt Hon Miss
Morrison, Charles (Devizes)
Walker, Rt Hon P. (Worcester)


Havers, Sir Michael
Morrison, Hon Peter (Chester)
Walters, Dennis


Hawkins, Paul
Neave, Airey
Weatherill, Bernard


Hayhoe, Barney
Nelson, Anthony
Wells, John


Heseltine, Michael
Neubert, Michael
Whitelaw, Rt Hon William


Hicks, Robert
Newton, Tony
Wiggin, Jerry


Higgins, Terence L.
Nott, John
Winterton, Nicholas


Holland, Philip
Onslow, Cranley
Wood, Rt Hon Richard


Hordern, Peter
Oppenheim, Mrs Sally
Young, Sir G. (Ealing, Acton)


Howe, Rt Hn Sir Geoffrey
Page, John (Harrow West)
TELLERS FOR THE AYES:


Howell, David (Guildford)
Page, Rt Hon R. Graham (Crosby)
Mr. Adam Butler and


Howells, Geraint (Cardigan)
Pardoe, John
Mr. Fred Silvester.




NOES


Abse, Leo
Barnett, Guy (Greenwich)
Booth, Albert


Allaun, Frank
Barnett, Rt Hon Joel (Heywood)
Boothroyd, Miss Betty


Anderson, Donald
Bates, Alt
Bottomley, Rt Hon Arthur


Archer, Peter
Bean, R. E.
Boyden, James (Bish Auck)


Ashley, Jack
Benn, Rt Hon Anthony Wedgwood
Bradley, Tom


Ashton, Joe
Bennett, Andrew (Stockport N)
Bray, Dr Jeremy


Atkins, Ronald (Preston N)
Bidwell, Sydney
Brown, Hugh D. (Provan)


Atkinson, Norman
Bishop, E. S.
Brown, Robert C. (Newcastle W)


Bagier, Gordon A. T.
Blenkinsop, Arthur
Brown, Ronald (Hackney S)


Bain, Mrs Margaret
Boardman, H.
Buchan, Norman







Buchanan, Richard
Heffer, Eric S.
Ovenden, John


Butler, Mrs Joyce (Wood Green)
Henderson, Douglas
Padley, Walter


Callaghan, Jim (Middleton &amp; P)
Hooley, Frank
Park, George


Campbell, Ian
Horam, John
Parker, John


Canavan, Dennis
Howell, Denis (B'ham, Sm H)
Parry, Robert


Cant, R. B.
Hoyle, Doug (Nelson)
Pendry, Tom


Carmichael, Neil
Huckfield, Les
Perry, Ernest


Carter, Ray
Hughes, Rt Hon C. (Anglesey)
Phipps, Dr Colin


Carter-Jones, Lewis
Hughes, Mark (Durham)
Prentice, Rt Hon Reg


Cartwright, John
Hughes, Robert (Aberdeen N)
Prescott, John


Castle, Rt Hon Barbara
Hughes, Roy (Newport)
Price, C. (Lewisham W)


Clemitson, Ivor
Hunter, Adam
Price, William (Rugby)


Cocks, Michael (Bristol S)
Irving, Rt Hon S. (Dartford)
Radice, Giles


Cohen, Stanley
Jackson, Colin (Brighouse)
Reid, George


Coleman, Donald
Jackson, Miss Margaret (Lincoln)
Richardson, Miss Jo


Colquhoun, Mrs Maureen
Jay, Rt Hon Douglas
Roberts, Albert (Normanton)


Concannon, J. D.
Jeger, Mrs Lena
Roberts, Gwilym (Cannock)


Conlan, Bernard
Jenkins, Hugh (Putney)
Robertson, John (Paisley)


Cook, Robin F. (Edin C)
Jenkins, Rt Hon Roy (Stechford)
Roderick, Caerwyn


Corbett, Robin
John, Brynmor
Rodgers, George (Chorley)


Cox, Thomas (Tooting)
Johnson, James (Hull West)
Rodgers, William (Stockton)


Craigen, J. M. (Maryhill)
Johnson, Walter (Derby S)
Rooker, J. W.


Crawford, Douglas
Jones, Alec (Rhondda)
Roper, John


Cronin, John
Jones, Barry (East Flint)
Rose, Paul B.


Crosland, Rt Hon Anthony
Jones, Dan (Burnley)
Ross, Rt Hon W. (Kilmarnock)


Cryer, Bob
Judd, Frank
Rowlands, Ted


Cunningham, G. (Islington)
Kaufman, Gerald
Ryman, John


Cunningham, Dr J. (Whiteh)
Kelley, Richard
Sandelson, Neville


Dalyell, Tam
Kerr, Russell
Sedgemore, Brian


Davidson, Arthur
Kilroy-Silk, Robert
Selby, Harry


Davies, Bryan (Enfield N)
Kinnock, Neil
Shaw, Arnold (Ilford South)


Davies, Denzil (Llanelli)
Lambie, David
Sheldon, Robert (Ashton-u-Lyne)


Davies, Ifor (Gower)
Lamborn, Harry
Shore, Rt Hon Peter


Davis, Clinton (Hackney C)
Lamond, James
Short, Rt Hon E. (Newcastle C)


Deakins, Eric
Latham, Arthur (Paddington)
Short, Mrs Renée (Wolv NE)


Dean, Joseph (Leeds West)
Leadbitter, Ted
Silkin, Rt Hon John (Deptford)


Delargy, Hugh
Lee, John
Silkin, Rt Hon S. C. (Dulwich)


Dell, Rt Hon Edmund
Lewis, Arthur (Newham N)
Sillars, James


Dempsey, James
Lewis, Ron (Carlisle)
Silverman, Julius


Doig, Peter
Lipton, Marcus
Skinner, Dennis


Dormand, J. D.
Litterick, Tom
Small, William


Douglas-Mann, Bruce
Loyden. Eddie
Smith, John (N Lanarkshire)


Duffy, A. E. P.
Luard, Evan
Snape, Peter


Dunn, James A.
yon, Alexander (York)
Spearing, Nigel


Dunnett, Jack
Lyons, Edward (Bradford W)
Spriggs, Leslie


Dunwoody, Mrs Gwyneth
Mabon, Dr J. Dickson
Stallard, A. W.


Eadie, Alex
McCartney, Hugh
Stewart, Donald (Western Isles)


Edge, Geoff
MacCormick, Iain
Stewart, Rt Hon M. (Fulham)


Ellis, John (Brigg &amp; Scun)
McElhone, Frank
Stott, Roger


Ellis, Tom (Wrexham)
MacFarquhar, Roderick
Strang, Gavin


English, Michael
McGuire, Michael (Ince)
Strauss, Rt Hon G. R.


Ennals, David
Mackenzie, Gregor
Taylor, Mrs Ann (Bolton W)


Evans, Gwynfor (Carmarthen)
Mackintosh, John P
Thomas, Dafydd (Merioneth)


Evans, John (Newton)
Maclennan, Robert
Thomas, Jeffrey (Abertillery)


Ewing, Harry (Stirling)
McMillan, Tom (Glasgow C)
Thomas, Mike (Newcastle E)


Ewing, Mrs Winifred (Moray)
McNamara, Kevin
Thomas, Ron (Bristol NW)


Faulds, Andrew
Madden, Max
Thompson, George


Fernyhough, Rt Hon E.
Magee, Bryan
Thorne, Stan (Preston South)


Flannery, Martin
Mahon, Simon
Tierney, Sydney


Fletcher, Raymond (Ilkeston)
Marks, Kenneth
Tinn, James


Fletcher Ted (Darlington)
Marquand, David
Tomlinson, John


Foot, Rt Hon Michael
Marshall, Dr Edmund (Goole)
Torney, Tom


Ford, Ben
Marshall, Jim (Leicester S)
Urwin, T. W.


Forrester, John
Mason, Rt Hon Roy
Varley, Rt Hon Eric G.


Fowler, Gerald (The Wrekin)
Meacher, Michael
Wainwright, Edwin (Dearne V)


Fraser, John (Lambeth, N'w'd)
Mellish, Rt Hon Robert
Walden, Brian (B'ham, L'dyw'd)


Freeson, Reginald
Mikardo, Ian
Walker, Harold (Doncaster)


Garrett John(Norwich S)
Millan, Bruce
Walker, Terry (Kingswood)


Garrett, W. E. (Wallsend)
Miller, Dr M. S. (E Kilbride)
Ward, Michael


George, Bruce
Miller Mrs Millie (Ilford N)
Watkins, David


Gilbert, Dr John
Mitchell, R. C. (Soton, Itchen)
Watkinson, John


Ginsburg, David
Moiloy, William
Watt, Hamish


Golding, John
Moonman, Eric
Weetch, Ken


Gould, Bryan
Morris, Alfred(wythenshawe)
Weitzman, David


Gourlay, Harry
Morris, Charles R. (Openshaw)
Wellbeloved, James


Graham, Ted
Morris, Rt Hon J(Aberavon)
Welsh, Andrew


Grant, George (Morpeth)
Mulley, Rt Hon Frederick
White, Frank R. (Bury)


Hamilton, James (Bothwell)
Murway, Rt Hon Ronald King
White, James (Pollok)


Hamilton, W. W. (Central Fife)
Newens, Stanley
Whitehead, Phillip


Hardy, Peter
Noble, Mike
Whitlock William


Harper, Joseph
Oakes, Gordon
Wigley, Dafydd


Harrison, Walter (Wakefield)
Ogden, Eric
Willey, Rt Hon Frederick


Hatton, Frank
O'Halloran, Michael
Williams, Alan(Swansea W)


Hayman, Mrs Helena
O'Malley, Rt Hon Brian



Healey, Fit Hon Denis
Orbach, Maurice
Williams, Alan Lee(Hornch'ch)







Williams, Rt Hon Shirley (Hertford)
Wilson, William (Coventry SE)
Young, David (Bolton E)


Williams, W. T. (Warrington)
Wise, Mrs Audrey
TELLERS FOR THE NOES


Wilson, Alexander (Hamilton)
Woodall, Alec
Mr. Laurie Pavitt and


Wilson, Gordon (Dundee E)
Wrigglssworth. Ian
Mr. David Stoddart.

Question accordingly negatived.

Amendment agreed to.

Mr. Joel Barnett: I beg to move Amendment No. 220, in page 92, line 28, leave out 26th ' and insert 27th '.
This amendment ensures that this excellent tax will start on 27th March, If it had not been for the irresponsibility of the Opposition, we should have had a proper debate on Third Reading. Instead, we have wasted two days of the Report stage because of the antics of the Opposition.
There was every opportunity for the Opposition to debate the Bill and this tax properly. They refused to do so. They did not want to do so. What they have sought to do has been to keep estate duty, a tax that had been steadily avoided. Capital transfer tax is an excellent tax. What is more, by their procedures and antics over the past few months, the Opposition—

Mr. Graham Page: On a point of order, Mr. Deputy Speaker. I cannot connect anything that the Chief Secretary is saying at the moment with the amendment that he is proposing.

Mr. Deputy Speaker: Patience is a virtue.

Mr. Barnett: I am sorry that the right hon. Gentleman does not like to hear about this tax. It will start on 27th March. It will help small shopkeepers.

Sir G. Howe: On a point of order, Mr. Deputy Speaker. The amendment now being moved by the Chief Secretary manifests that the debate is ending, as it began, with a correction by the Government.

Hon. Members: That is not a point of order.

Mr. Deputy Speaker: Order. There is no need to get excited. I am sure that the right hon. and learned Gentleman will come to a point of order.

Sir G. Howe: The debate is ending as it began—

Hon. Members: What about the point of order?

Mr, Deputy Speaker: Debating points are not made points of order. If it is a point of order, I shall, of course take it, but not ii it is a debating point.

Sir G. Howe: The point I am making is this. This; is one of a long series of Government amendments to the same effect—it replaces one date by another. We have dealt with all those preceding it as a matter of routine and each and every one ha ; been moved formally This is an acknowledgement that the Government made z profound mistake even as to the date when the tax would begin.

Mr. Deputy Speaker: Order. It is not fair to draw the Chair into the argument betweer the two sides as to which shall have tie last word. If the right hon. and learned Gentleman has a point of order, he should quickly make it or sit down.

Sir G. Howe: Thank you, Mr. Deputy Speaker. As this is a routine admission that this is a 5overnment mistake, one of many that they have made, is it in order for the Chief Secretary—

Mr. Deput3 Speaker: Mr. Deput3 Speaker rose—

Several Hon. Members: Several Hon. Members rose—

Mr. Deputy Speaker: Order. Right hon. and hon. Members should resume their seats when the occupant of the Chair stands up.

Sir John Hall: On a point of order, Mr.,Deputy Speaker.

Mr. Deputy Speaker: Sir John Hall.

Mr. Joel Barnett: On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker: I have called Sir John Hall for a point of order.

Sir John Hall: On a point of order. Can you advise the House, Mr. Deputy Speaker, how the rights of hon. Members are to be safeguarded? You will be aware that the Report stage—

It being Twelve o'clock Mr. DEPUTY SPEAKER proceeded pursuant to the order[4th March], to put forthwith the Questions an amendments to the Bill, moved


by a Minister of the Crown, of which notice had been given.

Amendments made : No. 220, in page 92, line 28, leave out ' 26th' and insert 27th '.

No. 222, in line 30, leave out 26th' and insert 27th '.

No. 224, in line 45, at end insert:

' Small gifts to same person

3A.—(1) Transfers of value made by a transferor in any one year by outright gifts to any one person are exempt to the extent that the values transferred by them (calculated as values on which no tax is chargeable) do not exceed £100.

(2) In this paragraph "year" has the same meaning as in paragraph 2 above '.

No. 226, in page 93, line 6, after that ', insert (taking one year with another) '

No. 228, in line 38, at end insert :
'(a) in the case of gifts within sub-paragraph (2) below by a parent of a party to the marriage, £5,000 ; '

No. 230, in line 39, after of ', insert other '.

No. 233, in page 94, line I, leave out sub-paragraph ' and insert paragraph '.

No. 237, in page 95, line 9, leave out made by any one transferor '.

No. 239, in page 95, leave out lines 12 to 17 and insert:
(b) so far as made on or within one year of the death of the transferor, do not exceed £100,000.
(2) Notwithstanding anything in paragraph 6 of Schedule 5 to this Act, where property is given to a charity by the making of a distribution payment within the meaning of that paragraph, the distribution payment is not a capital distribution for the purposes of that Schedule '.

No. 243, in line 27, leave out £50,000 ' and insert £100,000 '.

No. 244, in line 27, at end insert :
' (5) In its application to Northern Ireland, sub-paragraph (4) above shall have effect as if for the references to section 121 of and Schedule 26 to the Finance Act 1972 there were substituted references to Article 5 of and Schedule 2 to the Finance (Northern Ireland) Order 1972 '.

No. 794, in line 27, at end insert:

`Gifts to political parties

9A.—(1) Subject to the provisions of Part II of this Schedule, transfers of value are exempt to the extent that the values transferred by them—

(a) are attributable to property which becomes the property of a political party qualifying for exemption under this paragraph ; and

(b) so far as made on or within one year of the death of the transferor, do not exceed £100,000.

(2) A political party qualifies for exemption under this paragraph if, at the last general election preceding the transfer of value, —

(a) two members of that party were elected to the House of Commons ; or
(b) one member of that party was elected to the House of Commons and not less than one hundred and fifty thousand votes were given to candidates who were members of that party '.

No. 793, in page 96, line 34, leave out preceding '.

No. 795, in page 98, line 15, after ' paragraph ', insert 9A '. —[Mr. Joel Barnett.]

Schedule 7

MISCELLANEOUS EXEMPTIONS AND RELIEFS

Amendments made : No. 249, in page 102, line 10, after all ', insert known '.

No. 251, in line 13, leave out from ' are ' to persons '.

No. 252, in page 106, line 4, after Act ' insert
'and nothing in section 43 of this Act shall be taken to affect the interpretation of any such provision '.

No. 253, in line 11, after first ` tax ', insert
' or is chargeable on or by reference to death or gifts inter vivos '. —[ Mr. Joel Barnett.]

Schedule 8

RELIEF FOR AGRICULTURAL PROPERTY

Amendments made : No. 257, in page 107, line 34, leave out from replaced ' to two ' in line 35 and insert
' other agricultural property and was so occupied by him for a period which, when added to any period during which he so occupied the replaced property, comprised at least '.

No. 441, in page 108, line 11, at end insert
' (3A) Where the agricultural property had, at some time before the transfer, been occupied by the transferor for the purposes of agriculture and was, throughout the period between that time and the transfer, so occupied by a member of his family, the conditions in sub-paragraph (1) above shall be treated as satisfied if they would have been satisfied had the transfer occurred at that time '.

No. 261, in line 34, at end insert
' (5A) For the purposes of sub-paragraph (1) above occupation by a company which is controlled by the transferor shall be treated as


occupation by the transferor ; and for this purpose the question whether any company is controlled by the transferor shall be determined as for the purposes of paragraph 13 of Schedule 4 to this Act '.

No. 262, in line 37, at end insert
' (7) For the purposes of sub-paragraph (3A) above, a person is a member of the transferor's family if he is the transferor's spouse or a relative of the transferor or of the transferor's spouse or is the spouse of such a relative ; and "relative" means ancestor, lineal descendant, brother, sister, uncle, aunt, nephew or niece, "spouse" includes former spouse, and an adopted person shall be treated as the child of the person or persons by whom he was adopted and an illegitimate person as the child of his mother and reputed father '.

No. 264, in page 109, line 9, leave out from replaced ' to two ' in line 10 and insert
' other agricultural property and was so occupied by it for a period which, when added to any period during which it so occupied the replaced property, comprised at least'.

No. 270, in page 110, line 21, at end insert
' or such other multiple of that rental value as the Treasury may from time to time by order made by statutory instrument prescribe'.

No. 276, in line 37, at end insert
' but taking into account any order under subparagraph (1) above '.

No. 227, in line 43, leave out from beginning to a ' in line 44 and insert
'No order shall be made under this paragraph unless a draft of it has been laid before and approved by '.

No. 279, in line 45, at end insert

'Channel Islands and Isle of Man

9A. This Part of this Schedule applies in relation to land or activities carried on in the Channel Islands or the Isle of Man as if the land were situated or the activities were carried on in the United Kingdom ; and the multiplied rental value of agricultural property in the Channel Islands or the Isle of Man shall be the same fraction of its agricultural value as in the case of agricultural property in Northern Ireland '.—[Mr. Joel Barnett.]

Schedule 9

VALUATION

Amendments made : No. 284, in page 113, line 38, leave out ' 26th' and insert 27th '.

No. 286, in page 114, line 17, leave out 26th ' and insert 27th '.

No. 288,in page 115, line 33, leave out
'sub-paragraph (2) below ' and insert:
'the following provisions of this paragraph'.

No. 289,line 47, at end, insert:
'(3) Sub-paragraph (1) above does not apply where the policy is one under which the sum assured becomes payable only if the person whose life is insured dies before the expiry of a specified term or both before the expiry of aspecified term and during the life of a specified persor and which, if that specified term ends, or can, under the policy, be extended so as to end, more than three years after the making of the insurance, satisfies the condition that, if neither the person whose life is insured nor the specified person dies before the expiry of he specified term—

(a) the premiums are payable during at Is of that term and at yearly ervals ; and
(b) the premiums payable in any one lye months are not more than twice the premiums payable in any other such period.
(4) where the policy is one under which—

(a) the benefit secured is expressed in le of which is published and subject to fluctuation; and
(b) the payment of each premium secures to the policy of a specified number of such units ;
then if the value, at the time of the transfer of the units allocated to the policy of premiums is less than the aggregate of what the respective values of the units were at the time of allocation, the value to be taken under sub-paragraph (1) above as a minimum shall be reduced by the difference '.—[Mr. Joel Barnett.]

Schedule 10

AMENDMENT OF ESTATE DUTY ENACTMENTS

Amendments made : No. 290, in page 123, line 28, after transfer ', insert made on death

No. 291, page 124, line 20, leave out paragraph 4.

No. 292, in line 31, at end insert made on death '.

No. 293, in page 125, line 20, leave out paragraph 8.—[Mr. Joel Barnett.]

Mr. DEPUTY SPEAKER then proceeded pursuant to Order [4th March], to put forthwith the Question, That the Bill be now read the Third time : —

The House divided : Ayes 278, Noes 253.

Division No. 139.]
AYES
[12 midnight


Abse, Leo
Archer, Peter
Atkins, Ronald (Preston N)


Allaun, Frank
Ashley, Jack
Atkinson, Norman


Anderson, Donald
Ashton, Joe
Bagier, Gordon A. T.




Barnett, Guy (Greenwich)
George, Bruce
Molloy, William


Barnett, Rt Hon Joel (Heywood)
Gilbert, Dr John
Moonman, Eric


Bates, Alf
Ginsburg, David
Morris, Alfred (Wythenshawe)


Bean, R. E.
Golding, John
Morris, Charles R. (Openshaw)


Benn, Rt Hon Anthony Wedgwood
Gould, Bryan
Morris, Rt Hon J. (Aberavon)


Bennett, Andrew (Stockport N)
Gourlay, Harry
Mulley, Rt Hon Frederick


Bidwell, Sydney
Graham, Ted
Murray, Rt Hon Ronald King


Bishop, E. S.
Grant, George (Morpeth)
Newens, Stanley


Blenkinsop, Arthur
Hamilton, James (Bothwell)
Noble, Mike


Boardman, H.
Hamilton, W. W. (Central Fife)
Oakes, Gordon


Booth, Albert
Hardy, Peter
Ogden, Eric


Boothroyd, Miss Betty
Harper, Joseph
O'Halloran, Michael


Bottomley, Rt Hon Arthur
Harrison, Walter (Wakefield)
O'Malley, Rt Hon Brian


Boyden, James (Bish Auck)
Hatton, Frank
Orbach, Maurice


Bradley, Tom
Hayman, Mrs Helene
Ovenden, John


Bray, Dr Jeremy
Healey, Rt Hon Denis
Padley, Walter


Brown, Hugh D. (Provan)
Heffer, Eric S.
Park, George


Brown, Robert C. (Newcastle W)
Hooley, Frank
Parry, Robert


Brown, Ronald (Hackney S)
Horam, John
Pavitt, Laurie


Buchan, Norman
Howell, Denis (B'ham, Sm H)
Pendry, Tom


Buchanan, Richard
Hoyle, Doug (Nelson)
Perry, Ernest


Butler, Mrs Joyce (Wood Green)
Huckfield, Les
Phipps, Dr Colin


Callaghan, Jim (Middleton &amp; P)
Hughes, Rt Hon C. (Anglesey)
Prentice, Rt Hon Reg


Campbell, Ian
Hughes, Mark (Durham)
Prescott, John


Canavan, Dennis
Hughes, Robert (Aberdeen N)
Price, C. (Lewisham W)


Cant, R. B.
Hughes, Roy (Newport)
Price, William (Rugby)


Carmichael, Neil
Hunter, Adam
Radice, Giles


Carter, Ray
Irving, Rt Hon S. (Dartford)
Richardson, Miss lo


Carter-Jones, Lewis
Jackson, Colin (Brighouse)
Roberts, Albert (Normanton)


Cartwright, John
Jackson, Miss Margaret (Lincoln)
Roberts, Gwilym (Cannock)


Castle, Rt Hon Barbara
Jay, Rt Hon Douglas
Robertson, John (Paisley)


Clemitson. Ivor
Jeger, Mrs Lena
Roderick, Caerwyn


Cocks, Michael (Bristol S)
Jenkins, Hugh (Putney)
Rodgers, George (Chorley)


Cohen, Stanley
Jenkins, Rt Hon Roy (Stechford)
Rodgers, William (Stockton)


Coleman, Donald
John, Brynmor
Rooker, J. W.


Colquhoun, Mrs Maureen
Johnson, James (Hull West)
Roper, John


Concannon, J. D.
Johnson, Walter (Derby S)
Rose, Paul B.


Conlan, Bernard
Jones, Alec (Rhondda)
Ross, Rt Hon W. (Kilmarnock)


Cook, Robin F. (Edin C)
Jones, Barry (East Flint)
Rowlands, Ted


Corbett, Robin
Jones, Dan (Burnley)
Ryman, John


Cox, Thomas (Tooting)
Judd, Frank
Sandelson, Neville


Craigen, J. M. (Maryhill)
Kaufman, Gerald
Sedgemore, Brian


Cronin, John
Kelley, Richard
Selby, Harry


Crosland, Rt Hon Anthony
Kerr, Russell
Shaw, Arnold (Ilford South)


Cryer, Bob
Kilroy-Silk, Robert
Sheldon, Robert (Ashton-u-Lyne)


Cunningham, G. (Islington S)
Kinnock, Neil
Shore, Rt Hon Peter


Cunningham, Dr J. (Whiteh)
Lambie, David
Short, Rt Hon E. (Newcastle C)


Dalyell, Tam
Lamborn, Harry
Short, Mrs Rençe (Wolv NE)


Davidson. Arthur
Lamond, James
Silkin, Rt Hon John (Deptford)


Davies, Bryan (Enfield N)
Latham, Arthur (Paddington)
Silkin, Rt Hon S. C. (Dulwich)


Davies, Denzil (Llanelli)
Leadbitter, Ted
Sillars, James


Davies, Ifor (Gower)
Lee, John
Silverman, Julius


Davis, Clinton (Hackney C)
Lewis, Arthur (Newham N)
Skinner, Dennis


Deakins, Eric
Lewis, Ron (Carlisle)
Small, William


Dean, Joseph (Leeds West)
Lipton, Marcus
Smith, John (N Lanarkshire)


Delargy, Hugh
Litterick, Tom
Snape, Peter


Dell, Rt Hon Edmund
Loyden, Eddie
Spearing, Nigel


Dempsey, James
Luard, Evan
Spriggs, Leslie


Doig, Peter
Lyon, Alexander (York)
Stallard, A. W. 


Dormand, J. D.
Lyons, Edward (Bradford W)
Stewart, Rt Hon M. (Fulham)


Douglas-Mann, Bruce
Mabon, Dr J. Dickson
Stott, Roger


Duffy, A. E. P.
McCartney, Hugh
Strang, Gavin


Dunn, James A.
McElhone, Frank
Strauss, Rt Hon G. R.


Dunnett, Jack
MacFarquhar, Roderick
Taylor, Mrs Ann (Bolton W)


Dunwoody, Mrs Gwyneth
McGuire, Michael (Ince)
Thomas, Jeffery(Abertillery)


Eadie, Alex
Mackenzie, Gregor
Thomas, Mike (Newcastle E)


Edge, Geoff
Mackintosh, John P.
Thomas, Ron(Bristol NW)


Ellis, Tom (Wrexham)
Maclennan, Robert
Thomas, Ron (Bristol NW)


English, Michael
McMillan, Tom (Glasgow C)
Thorne, Stan (Preston South)


Ennals, David
McNamara, Kevin
Tierney, Sydney


Evans, John (Newton)
Madden, Max
Tinn, James


Ewing. Harry (Stirling)
Wagee Bryan
Tomlinson, John


Faulds, Andrew
Mahon, Simon
Torney, Tom


Fernyhough, Rt Hon E.
Marks, Kenneth
Urwin, T. W.


Flannery, Martin
Marquand, David
Varley, Rt Hon Eric G.


Fletcher, Raymond (Ilkeston)
Marshall, Dr Edmund (Goole)
Wainwright, Edwin (Dearne V)


Fletcher Ted (Darlington)
Marshall, Jim (Leicester S)
Walden, Brian (B'ham, L'dyw'd)


Foot, Rt Hon Michael
Mason, Rt Hon Roy
Walker, Harold (Doncaster)


Ford, Ben
Meacher, Michael
Walker, Terry (Kingswood)


Forrester, John
Mellish, Rt Hon Robert
Ward, Michael


Fowler, Gerald (The Wrekin)
Mikardo, Ian
Watkins, David


Fraser, John (Lambeth, N'w'd)
Millan, Bruce
Watkinson, John


Freeson, Reginald
Miller, Dr M. S. (E Kilbride)
Weetch, Ken


Garrett, John (Norwich S)
Miller, Mrs Millie (Ilford N)
Weitzman, David


Garrett, W. E. (Wallsend)
Mitchell. R. C. (Soton, Itchen)
Wellbeloved, James







White, Frank R. (Bury)
Williams, Alan Lee (Hornch'ch)
Woodall, Alec


White, James (Pollok)
Williams, Rt Hon Shirley (Hertford)
Wrigglesworth, Ian


Whitehead, Phillip
Williams, W. T. (Warrington)
Young, David (Bolton E)


Whitlock, William
Wilson, Alexander (Hamilton)
TELLERS FOR THE AYES:


Willey, Bt Hon Frederick
Wilson, William (Coventry SE)
Mr. John Ellis and


Williams, Alan (Swansea W)
Wise, Mrs Audrey
Mr. David Stoddart.




NOES


Adley, Robert
Glyn, Dr Alan
Maxwell-Hyslop, Robin


Aitken, Jonathan
Goodhart. Philip
Mayhew, Patrick


Alison, Michael
Goodhew, Victor
Meyer, Sir Anthony


Arnold, Tom
Goodlad, Alastair
Miller, Hal (Bromsgrove)


Atkins, Rt Hon H. (Spelthorne)
Gorst, John
Mills, Peter


Awdry, Daniel
Gow, Ian (Eastbourne)
Miscampbell, Norman


Bain, Mrs Margaret
Gower, Sir Raymond (Barry)
Mitchell. David (Basingstoke)


Baker, Kenneth
Grant, Anthony (Harrow C)
Moate, Roger


Banks, Robert
Gray, Hamish
Monro, Hector


Beith, A. J.
Grieve, Percy
Montgomery, Fergus


Bell, Ronald
Griffiths, Eldon
Moore John (Croyden C)


Bennett, Sir Frederic (Torbay)
Grist Ian
More, Jasper (Ludlow)


Bennett, Dr Reginald (Fareham)
Grylls Michael
Morgan, Geraint


Benyon,W.
Hall, Sir John
Morgan-Giles, Rear-Admiral


Berry, Hon Anthony
Hall-Davis, A. G. F.
Morris, Michael (Northampton S)


Biffen, John
Hampson, Dr Keith
Morrison, Charles (Devizes)


Biggs-Davison, John
Hannam, John
Morrison, Hon Peter (Chester)


Blaker, Peter
Hannam, John
Neave, Airey


Boscawen, Hon. Robert
Harrison, Col Sir Harwood (Eye)
Nelson, Anthony


Bowden, A. (Brighton, Kemptown)
Harvie Anderson, Rt Hon Miss
Neubert, Michael


Boyson, Dr. Rhodes (Brent)
Hastings Stephen
Newton, Tony


Braine, Sir Bernard
Havers, Sir Micheel
Nott, John


Brittan, Leon
Hawkins, Paul
Onslow, Cranley


Brotherton, Michael
Hayhoe, Barney
Oppenheim, Mrs Sally


Brown, Sir Edward (Bath)
Henderson, Douglas
Page, John (Harrow West)


Bryan, Sir Paul
Heseltine, Michael
Page, Rt Hon R. Graham (Crosby)


Buchanan-Smith, Alick
Hicks, Robert
Pardoe, John


Buck, Antony
Higgins, Terence L.
Parkinson, Cecil


Budgen, Nick
Holland, Philip
Penhaligon, David


Bulmer, Esmond
Holland, Peter
Percival, Ian


Burden, F.A. 
Howe, Rt Hn Sir Geoffrey
Peyton, Rt Hon John


Burden, F. A. 
Howell David (Gulldford)
Pink, R. Bonner


Carlisle, Mark
Howells. Geraint (Cardign)
Pym, Rt. Hon Francis


Chalker, Mrs Lynda
Hunt, John
Raison, Timothy


Channon, Paul




Clark, Alan (Plymouth, Sutton)
Hurd, Douglas
Rathbone, Tim


Clark, William (Croydon S)
Irving, Charles (Cheltenham)
Rawlinson, Rt Hon Sir Peter


Clarke, Kenneth (Rushcliffe)
James, David
Rees, Peter (Dover &amp; Deal)


Clegg, Walter
Jenkin, Rt Hon P.(Wanst'd &amp; W'df'd)
Rees, Davies, W.R.


Cockcroft, John
Jessel, Toby



Cooke, Robert (Bristol W)
Johnson Smith, G.(E.Grinstead)
Reid George


Cope, John
Jones, Arthur (Daventry)
Renton, Rt Hon Sir D. (Hunts)


Cormack, Patrock
Jopling Michael
Renton, Tim (Mid-Sussex)


Costain, A.P.
Joseph, Rt Hon Sir Keith
Ridley, Hon Nicholas


Crawford, Douglas
Kaberry, Sir Donald
Ridsdale, Julian


Critchley, Julian
Kershaw, Anthony
Rifkind, Malcolm


Crowder, F.P.
Kilfedder, James
Roberts, Michael (Cardiff NW)


Dean, Paul (N Somerset)
Kimball, Marcus
Roberts, Wyn (Conway)


Dodsworth, Geoffrey
King, Evelyn (South Dorset)
Ross, Stephen (Isle of Wight)


Douglas-Hamilton, Lord James
King, Tom (Bridgwater)
Rossi, Hugh (Hornsey)


du Cann, Rt Hon Edward
Knight Mrs Jill
Rost, Peter (SE Derbyshire)


Durant, Tony
Knox, David
Royal, Sir Anthony


Eden, Rt Hon Sir John
Lamont, Norman
Sainsbury, Tim


Edwards, Nicholas (Pembroke)
Lane, David
St. John-Stevas, Norman


Elliott, Sir William
Lamont, Norman
Shaw, Giles (Pudsey)


Emery, Peter
Lane, David
Shelton, William (Streatham)


Evans, Gwynfor (Carmarthen)
Lawrence Ivan
Shepherd, Colin


Ewing, Mrs Winifred (Moray)
Lawson, Nigel
Shersby, Michael


Eyre Reginald
Le Marchant, Spencer
Sims, Roger


Faibairn, Nicholas
Lester Jim (Beeston)
Sinclair, Sir George


Fairgrieve, Russell
Lewis, Kenneth (Rutland)
Skeet, T.H.H.


Farr, John
Lloyd, Ian
Smith, Cyril (Rochdale)


Fell, Anthony
Loveridge, John
Smith, Dudley (Warwick)


Finsberg, Geoffrey
Luce, Richard
Speed, Keith


Fisher, Sir Nigel
Mac Cormick, Iain
Spence, John


Fletcher, Alex (Edinburgh N)
Mc Crindle, Robert
Spicer, Michael (S Worcester)


Fletcher, Miss Janet
MacGregor, Neil
Sproat, Iain


Fowler, Norman (Sutton C'f'd)
MacGregor, John
Stanley, John


Fox, Marcus
Macmillan, Rt Hon M. (Farnham)
Steel, David (Roxburgh)


Fraser, Rt Hon H. (Stafford &amp; St)
McNair-Wilson, M. (Newbury)
Steen, Anthony (Wavertree)


Freud, Clement
McNair-Wilson, P. (New Forest)
Stewart, Donald (Western Isles)


Fry, Peter
Marshall, Michael (Arundel)
Stewart, Ian (Hitchin)


Gardiner, George (Reigate)
Marten, Neil
Stokes, John


Gardner, George (S Fylde)
Mates, Michael
Stradling Thomas, J.


Gilmour, Rt Hon Ian (Chesham)
Maudling, Rt Hon Reginald
Tapsell, Peter


Gilmour, Sir John (East Fife)
Mawby, Ray
Taylor, Teddy (Cathcart)







Tebbit, Norman
Wiggers, Peter
Wigley, Dafydd


Temple-Morris, Peter
Wakeham, John
Wilson, Gordon (Dundee E)


Thatcher, Rt Hon Margaret
Walker, Rt Hon P. (Worcester)
Winterton, Nicholas


Thomas, Dafydd (Merioneth)
Walters, Dennis
Wood, Rt Hon Richard


Thompson, George
Watt, Hamish
Young, Sir G. (Ealing, Acton)


Townsend, Cyril D.
Weatherill, Bernard



Trotter, Neville
Wells, John
TELLERS FOR THE NOES:


Tugendhat, Christopher
Welsh, Andrew
Mr. Adam Butler and


van Straubenzee, W. R.
Whitelaw, Rt Hon William
Mr. Fred Silvester.


Vaughan, Dr. Gerard
Wiggin, Jerry

Question accordingly agreed to.

Bill read the Third time and passed.

ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dormand]

Orders of the Day — EDUCATION (NORTHUMBERLAND)

12.12 a.m.

Mr. A. J. Beith: I am grateful to the Under-Secretary of State for Education and Science, the hon. Member for Putney (Mr. Jenkins), for agreeing to reply to the debate tonight. I know that his hon. Friend the Member for Durham, North-West (Mr. Armstrong) the other Under-Secretary, would have liked to be here ; he has had the courtesy to explain to me why he is unable to be present.
I look forward to the Under-Secretary's reply, knowing that he will have been well briefed by the Department and will take careful note of what is said.
After the party political divisions of the evening we turn to a subject which does not, in Northumberland at least, arouse party controversy to the same extent because the principle of comprehensive education is not now a party political issue there. Indeed, it is a Conservative-dominated county council which for 10 years has been committed to reorganising on comprehensive lines as quickly as local circumstances will permit. The arguments that have taken place have been about the particular pattern of reorganisation and the timing.
Several areas of Northumberland have already been reorganised and others are fairly well advanced. There are difficulties, there are teething troubles. There are troubles which sometimes seem slightly larger than that in some areas. Nevertheless, considerable progress has been made. The Coquet Valley, part of my constituency, has been reorganised.

The reorganisation in the Berwick district is now proceeding, and the county council has been helpful in recognising the anxieties of the parents about the building programme and trying to meet them halfway.
The areas that remain to be reorganised are the most difficult ones, particularly the Alnwick area, for which the county has recently put forward proposals for discussion. The education authority recognises that no scheme for the Alnwick area is likely to be entirely satisfactory without substantial re-building. Its present proposals have attracted few supporters, and the strongest criticis of them include those who are keen to see comprehensive education but regard this scheme as the worst possible way to introduce it.
What I hope the Minister will concede tonight is that Northumberland is in no way a "backsliding" authority in regard to comprehensive education and that he will not put pressure on the authority to rush into this particular scheme for Alnwick if, after discussion, it is found to be unacceptable.
It is difficult to foresee acceptance by the local community of a high school based on the totally inadequate facilities and site of the Alnwick Secondary Modern School. I mention this not because they are matters about which the Minister need be concerned at this stage, but to illustrate why there is considerable controversy. The secondary modern school is already surrounded by houses and the site cannot be extended ; the access roads are unsatisfactory. The site is already saturated by buildings and there obviously is not sufficient room for expansion. The main original buildings of the school, built in 1939, would be completely inadequate for the purposes of a high school and could be regarded as obsolete. Some of the other parts of the school are unsuitable, except for the most modern blocks. Therefore, it would be difficult to accommodate a high school on the site.
The one school in Alnwick which would be suitable for the development of a high school is the Duchess's School, a modern school, with which I have been most familiar because of the three election counts in which I have taken part—particularly memorable since they were nail-biting and cliff-hanging affairs. The exterior of that school has become familiar to a wider public, too, because it has figures on television screens each time the long-awaited count has been declared. There is in that building the basis for a modern high school. Although there are some problems on that site, too, there is a feeling among many people that it would be better place for a high school.
There are further difficulties in the proposals for the Alnwick area. For example, the proposed high school serving Ample and sited in South Broomhill is questionable, particularly in respect of its prospects of establishing a viable sixth form. It is thought by some that this sixth form work might be better concentrated in Alnwick. 1 do not seek detailed comment from the Minister on this matter, but I put it forward to illustrate the difficulties.
The parents whose children will attend these schools and the teachers must have the chance to hammer out a workable scheme with the education authority. At the moment there is a fear, implicit in the county council's attitude, that unless we rush into the present proposals the Minister will push the county into an even less satisfactory scheme. In Northumberland there is no suggestion of a rearguard attempt to hang on to selection and it would be quite inappropriate for the Minister's shadow to be cast over the discussions. I hope that he will not only remove that shadow but go further and recognise that if, as I believe, the Alnwick area cannot be reorganised without new building, money will be found to enable it to proceed. I hope we shall not be pushed rashly into any proposals. A "camping-out" comprehensive is the last thing we want.
I turn to some further aspects of comprehensive reorganisation in a scattered area, since there have been some serious difficulties over a wider area than Alnwick alone. I hope the Minister will give some indication of what advice the Department gives and what study has been

made of these problems. In adopting a three-tier system, with middle schools for the nine to 13 age group, Northumberland left itself with difficulties which I feel could have been avoided if instead it had opted for a sixth-form college, with a middle school from 11 to 16, at least in some of the rural areas.
As it is, some children are having to board at the middle school from the age of nine in so Tie parts of the country. I find that situation far from satisfactory. Although the number of children involved is not large, many parents are worried at the prospect of children having to board at an early age. Living as they do in an isolated situation, these parents accept the need for boarding or long travel-toschool distances for the sake of their children's education when they are older, but they find it hard to accept at nine.
Furthermore, some village primary schools becorie threatened with closure once the nine-year-old to 11-year-old groups are taken out of them. The reduction of the age range of the school by two years cuts the roll to a point at which closure is threatened. We have bussing on a colossal scale to convey children to distant schools. The further away the middle schools and high schools are, the more of this additional transport there is.
The three-t er scheme leaves no function for some existing schools: an excellent secondary school at Belford, built in 1960, is threatened with redundancy under the county's proposals.
No one should pretend that there is a simple, ideal scheme for reorganisation in Northumberland, but there would have been many advantages in applying an alternative scheme to some of the rural areas. My personal preference is for the sixth-form co lege pattern, which could have been considered more fully for the Alnwick area, in conjunction with one of the other are is, and which might have done away with the need to develop a high school at South Broomhill.
The county quotes as a reason for rejecting the sixth-form college scheme that the Department of Education and Science requires at least 500 pupils for a sixth-form college. To apply such a high minimum in an area of low population like Northumberland would be absurd. I hope that the Minister will say here


and now that he would not take so inflexible a line, particularly if there was a chance to associate further education work with the college. Although such a unit might be below the minimum size for normal sixth form college purposes, because it had a further education element it would be much more acceptable for some areas of the county. For most parts of the county the decision has been made, and that possible pattern of reorganisation is no longer open. If that has been, in part at least, because of a rigid line by the Department, I hope that it will not make the same mistake elsewhere, and that it will make it possible for the county to consider the sixth-form college system in its remaining areas.
There is no college of further education in North Northumberland. Those who need such facilities must go to Ashington, Tyneside or Edinburgh. For someone living in Berwick this means a round trip of over 120 miles, often involving staying away from home for 13 hours in the day. That is a tremendous discouragement to young people who could benefit from further education. Many young people who are put off by the early start and late return fail to get the opportunities that they should have, because they are unwilling to undertake courses involving so much travelling, or drop out after they have started such courses. The ones who persevere often decide that they will be much better off if they move to where the college is. They take up lodgings there and stay to get a job. Therefore, if they acquire new skills, these skills are not brought back to the area. Those people are added to the depopulation statistics, which are severe in our part of the country. They represent a further drain of skilled people from the area.
Obviously, the population of the area would not be enough to support a large college, but a substantial part of the Borders region of Scotland would benefit from the development of further education facilities in Berwick, and could help to finance it. I hope that no red tape—or "tartan tape "—will be put in the way of co-operation between the authorities on either side of the Border. The former local authorities of Northumberland and Berwickshire were agreed in principle and were moving in that direc-

tion. I hope that the English and Scottish Government Departments will be ready to work together and make cross-border co-operation on the issue possible.
Such facilities could be provided more economically if they were attached to an existing school, such as the new high school at Berwick. There is a need for flexibility and inventiveness to fill a severe gap in the education system of Northumberland. I understand that Northumberland County Council has been seeking such a development since 1972, but has still not gained departmental approval. I hope that it will not be long delayed.
To sum up, on secondary education I ask the Minister to recognise that Northumberland must be helped and encouraged to sort out the problem of Alnwick, with full and genuine discussion with parents and teachers. There should be no pressure to get off to a bad start. As regards further education, I hope that the Minister will recognise how badly we are served, and that he will give favourable consideration to proposals emanating from the Northumberland authority for developments at Berwick.

12.15 a.m.

The Under-Secretary of Slate for Education and Science (Mr. Hugh Jenkins): I am grateful to the hon. Member for Berwick-upon-Tweed (Mr. Beith) for the pleasant manner in which he referred to the fact that he is not getting the first team, as it were, and for the fact that he is willing to accept me as a stand-in on this occasion. I have spent some part of today acquainting myself with the subject of the debate. I hope that the hon. Gentleman will find not only that I am properly briefed but that I have succeeded in understanding the brief. I thank him for the way in which he has so clearly presented the argument. He has made it possible for someone who is not readily familiar with the subject to follow the case that he is making on both of the main issues that he has brought before the House.
The hon. Gentleman will be well aware from Circular 4/74 that it is the Government's intention to end selection in secondary education. As he has said, there is no argument about that. We


have made it clear on a number of occasions that local education authorities are expected to press on with reorganisation as quickly as possible. As the hon. Gentleman properly said, there can be no complaint about the general policy and attitude of the Northumberland authority on this matter.
It was not long after the publication of the circular that the Northumberland Education Authority produced a document dealing with the reorganisation of Alnwick and Amble school district. They are the only areas in Northumberland for which secondary reorganisation proposals have not been implemented or approved by the Secretary of State. My right hon. Friend has expressed satisfaction with the progress that Northumberland has made.
I pay tribute to the care with which the authority has formulated its proposals in the past. I understand that the discussion document in connection with Alnwick and Amble was approved by the education committee as a basis upon which discussions with teachers, managers, governors and parents should proceed. It is no more than that. The discussions are still taking place, and it is the intention of the authority to press ahead to complete the secondary reorganisation in its area. The details are a matter for the authority to formulate, but we are not leaving the matter at that.
The hon. Gentleman said that there are problems in some areas which should be recognised by the Government and that there should not be pressure to run into an unsatisfactory scheme. I believe that to be one of his main points. I understand him to say that we should not rush ahead with a scheme which might not be regarded subsequently as the one which everybody wished to adopt. I can give the hon. Gentleman the assurance that he seeks with no equivocation.
The Government made it clear in Circular 4/74 that there is more than one pattern of secondary reorganisation which is acceptable. We have never suggested that a uniform pattern must be adopted over the whole area of a large county. Because a particular formula has been adopted in some parts of the county it does not necessarily mean—and it does not mean the contrary—that the same pattern has to be adopted throughout the area or in the case that we have under

discussion. The relative advantages of various type: of education must depend to a great extent on practical considerations such as the availability of buildings and staff and the geography of the area, and not only upon the distribution of the population but whether it is increasing, static or even declining. There are also other purely educational considerations, such as the arrangements for sixth-form work and the deployment of the staff available. M y right. hon. Friend takes the view that these considerations are decisions for individual local education authorities to make after due consultation with local interests. As we all know, those consultations are taking place currently.
I am, of course, aware that successive Secretaries of State have approved the proposals for a middle school system for the area for which the Northumberland authority has so far made proposals. However, this does not mean that a similar system has to be adopted for Alnwick and Amble. If the scheme that the authority has put forward seems, after appropriate consideration, to be unacceptable locally, no doubt it will have another look at the problem and decide either to reaffirm or to came up with some variation in the proposals now under discussion. Officials of the; Department and inspectors are always ready to give informal advice on the understanding that the final decision on what is ultimately to be submitted to the. Secretary of State is a matter solely for the local education authority.

Dr. Keith Hampson: That is a most important point. The hon. Gentleman seemed to imply that a certain constraint had been placed on a particular system—that is, a sixth-form college system—when he said that it required a school of 500 pupils. Is the Department that rigid, or is it prepared to be flexible in a rural area?

Mr. Jenkins: We are not as rigid as that. There are certain problems. It is not sufficient to have forms of education which are satisfactory in other respects but arc not educationally satisfactorily. We have to make that qualification. But we are not laying down hard and fast rules on this. There are certain problems in rural areas which make it difficult sometimes to reach conclusions which in


other ways we should like to reach. But the Department has no hard and fast rule which says "No. This may not be done ". However, it is true that in consultation with the local education authority mutual conclusions are sometimes reached that a solution which may seem practicable then proves to be impracticable. This may be one such case. But the implied rigidity to which the hon. Gentleman referred is not so rigid as he suggested.
The hon. Gentleman touched on the problem of transport. Transport arrangements seem to work quite satisfactorily because not only is the road system good but it is not heavily trafficked. No child of nine is compelled to board if his parents do not wish him to, because arrangements are made for him to travel to school daily. I understand that there are no nine or 10-year olds in the boarding house at Rothbury at present.
The procedure laid down in Section 13 of the 1944 Education Act is that when proposals have been submitted to the Secretary of State the authority must then give public notice of this, and the managers or governors of any voluntary school affected by the proposals or any 10 or more local government electors for the area have the opportunity during the ensuing two months of forwarding objections to the proposals to the Secretary of State. All the points that have been mentioned and any others which arise may be submitted as objections. After he has considered the proposals and the objections, the Secretary of State will decide whether or not to approve the proposals. It is important that not only the proposals but the objections to the proposals can be, and will be, considered by the Secretary of State. Even if he approves, he may, of course, make some modifications to the proposals coming forward to him.
Because the Secretary of State has the statutory powers, it would be wrong of me to comment on the various local objections that the hon. Gentleman has so ably voiced. He himself suggested that it would be wrong to comment now on the various local objections. To do so might appear to prejudice the Secretary of State's decision before objections had been lodged. However, I assure the hon. Gentleman that his points about the organisation of schools, about time and

cost involved in transporting children to school and about the desire of communities to retain their own schools will all be taken into account and given careful consideration. I emphasise that no decisions have been reached by the local education authority, and still less by my right hon. Friend. I suppose that it would be true to say that, formally, my right hon. Friend is not yet seized of the problem, so the hon. Gentleman can be assured that he has not closed his mind to it.

Mr. Beith: What the hon. Gentleman says is true. However, his right hon. Friend's attitudes are to some extent predicted, and this influences people in what they think may be possible.

Mr. Jenkins: I understand that view That is why I was giving the hon. Gentleman these assurances.
The hon. Member asked about resources. In this respect I cannot give him much hope because this is an area where no great growth in the secondary school population can be expected. The circular makes it clear that authorities are expected to form their proposals on the basis of their existing resources. Of course, I cannot anticipate what the future will bring, but the authority would be wise to plan on the basis of existing accommodation.
I now turn to the other matter raised by the hon. Member—further education. The Government accept that further education should be available to those who want it as far as can reasonably be managed.
In recent speeches my right hon. Friend has re-emphasised the need for both higher education and lower-level courses, particularly provision for the 16 to 19year-olds. But the responsibility is with the local education authority, and the Northumberland authority has shown that it recognises this by its transport arrangements to Ashington College.
It is unfortunate that people from the Berwick area and, to a lesser extent, those from Alnwick have to travel so far for further education, although I understand that Ashington College does have some hostel accommodation.
In his speech the hon. Member suggested that further education provision


should be made at Berwick and at Alnwick. I understand that the local education authority has put forward proposals for provision only at Berwick. Even so, the problem will be whether or not the scale of the demand would be sufficient to make any facility viable. It is no good having a college or an outpost of a college which is not only uneconomic but lacks the necessary academic strength. Nevertheless, my right hon. Friend will give these proposals careful consideration. If there seems to be a good case for provision in North Northumberland, we shall certainly do our best to find the capital allocation necessary for any buildings required.
The hon. Member suggested that students from across the border could

help to strengthen the further education facilities at Berwick. We will, of course, also look into this matter, but it is questionable whether a sizeable Scottish invasion can be expected, even if on this occasion it might be more welcome than in the past.
I understand and welcome the hon. Member's concern for satisfactory education in his area. I assure him that the Government share this concern and will seek to support the Northumberland authority to whatever extent my right hon. Friend finds possible and practicable.

Question put and agreed to.

Adjourned accordingly at twenty-two minutes to One o'clock.